Trucks at Work

Where we’ve been, where we’re headed

CFO [chief financial officer] sentiment is driven by demand. [So] the deepening impact of the European debt crises combined with stagnant employment, continued housing issues and volatile financial markets at home do not bode well for consumer demand anywhere.{thus it’s] little wonder some CFOs are stepping back – even retreating – from their previous growth projections.” –Sanford Cockrell III, national managing partner-CFO program, Deloitte LLP


It’s been quite a mixed bag this past month or so, with a variety of surveys and polls indicating both positive and negative economic trends taking shape in the U.S. and around the world – though, for the most part, most of those findings are negative.

That’s creating an unfortunate “self-fulfilling” prophecy of sorts – and that’s an outcome that doesn’t bode well for the freight sector.

Take a survey of 91 chief financial officers (CFOs) – 75% of whom are from publicly traded companies, with another 75% from firms generating more than $1 billion in revenue – conducted back in late August by global consulting firm Deloitte LLP.

Sanford Cockrell III, Deloitte’s national managing partner for its CFO program, said the survey found that the persistent drumbeat of negative economic news is taking a toll on CFO optimism. In fact, for the first time in the history of this poll, CFOs who are more pessimistic about their own company's prospects outnumber optimists.

Moreover, CFOs are substantially cutting back growth and investment plans for the coming year due to ongoing concerns about the global economy, Cockrell added.

Deloitte’s survey found that optimism fell precipitously among CFOs in the third quarter with only 29% of them reporting a more positive outlook, down from 40% in the second quarter and 60% in the first. Moreover, the percent of respondents who are less optimistic skyrocketed to 53% in the third quarter from just 32% in the second.


Indeed, more than half of CFOs (52%) polled by Deloitte said the recent economic turmoil will negatively impact – or has already negatively impacted – their financial projections.

And while growth projections largely remain positive, Deloitte’s most of the CFOs it polled are tempering their expectations for year-over-year revenue growth, pulling projections down to 6.8% versus 7.1% in the second quarter. That’s matched by a decline in expected earnings growth, too (9.3% versus 14%.

CFOs also said they are reducing their projections for year-over-year capital spending to 7.9%, compared to 10.7% in the second quarter, alongside a decrease in domestic hiring plans (1.2% from 2% in the second quarter).

The U.S. economy probably won’t witness a bump-up in holiday sales, either, as consumers are reporting in a number of surveys that caution is their spending watchword (and I completely agree with that belief, I might add!)

Take for example a telephone survey conducted among 1,000 U.S. adults by Ipsos Public Affairs for, an online coupon firm owned by Vertive LLC. That poll found that, given the state of the economy, 87% of respondents are planning to spend the same or less during the upcoming holiday season than they did in 2010, with almost half of those consumers reporting that they are looking for deals throughout the year when shopping for those on their holiday gift list.

None of this generates much hope that freight volumes will remain robust for the rest of 2011. Yet truckers seem to be adapting to all the uncertainty out there – indeed, in some cases, they are profiting handsomely from it.

Take J.B. Hunt Transport Services, as one example. Despite the stop-and-go economy of the past few months, the Lowell, AR-based carrier generated record profits in the third quarter this year: $68.7 million to be exact, on $1.17 billion in revenue, even after including a $4 million pretax expense related to a financial commitment to the Arkansas Children’s Hospital, which shaved 2 cents off J.B. Hunt’s earnings per share.

[And bless them for taking a hit on the bottom line for such charitable support.]

That’s compared to net earnings of $52.2 million on $986 million in revenues during the same period in 2010, by the way.

So how is J.B. Hunt growing profits and revenues in such a topsy turvy environment? You can boil it down to three words: diversify, diversify, and diversify.


In essence, the carrier is moving farther and farther beyond its truckload roots to focus on its intermodal, dedicated, and “integrated capacity solutions” (ICS) divisions – businesses that are generating double-digit growth in both revenues and operating income, whereas its TL division is posting only low-single digit improvements.

“Load growth of 15% in intermodal and 14% in ICS helped drive 24% and 21% increases in segment revenue, respectively,” J.B. Hunt noted in its third quarter earnings statement. “Our dedicated contract services (DCS) segment increased operating revenue by 16% primarily from new accounts, while our truck [TL] segment revenue rose 2% due to higher rates and an increase in fuel surcharges.”

Overall, third quarter total operating revenue, excluding fuel surcharges, increased 11% versus the same quarter 2010, the carrier noted.

“[By] combining the right mix of services … we overcame less predictable freight patterns and some weather related events to produce another record quarter [and] we continued to invest capital in businesses that show resiliency despite the ongoing concern many have expressed about the economy,” noted John Roberts, J.B. Hunt’s president and CEO, in a statement. “Intermodal, DCS and ICS all delivered double digit growth year over year in both revenue and operating income.”

Now, not every carrier can easily offer such a wide mix of freight services, but it seems that those that can are picking up business that’s helping them navigate the economic turmoil now roiling the freight market’s waters – and it may yet help them deal with the economic storms that are surely yet to come.