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Tight capacity bolsters trucking’s second quarter earnings

Tight capacity, along with lower fuel prices, helped sustain trucking earnings in the second quarter this year – even as a falloff in freight volumes began affecting revenues.

For example, Werner Enterprises noted that its net income increased 11% to $30.6 million when compared to the same period in 2011 – despite recording a 1% decline in its trucking revenues less fuel surcharge monies to $331.9 million.

The carrier’s year-to-date numbers reflect the same trend: a 19% jump in net income to $51.9 million compared to the first six months of last year, while revenues stayed statistically flat at $653.2 million versus $650.2 million during the first half of 2011.

“Freight demand trends are being helped both by supply side constraints limiting truckload capacity and demand generated by economic activity from our customers,” Werner noted in its second quarter earnings statement. “We continue to be successful in this tightening capacity environment by working jointly with our customers to secure sustainable transportation solutions across all modes.”

The carrier added that a significant decline in diesel fuel prices is helping sustain trucking profitability as well. “Diesel fuel prices were 16 cents per gallon lower in second quarter this year than in second quarter of 2011 and were 15 cents per gallon lower than in first quarter 2012,” Werner stated. “For the first 18 days of July, the average diesel fuel price per gallon was 26 cents lower than the average diesel fuel price per gallon in the same period in 2011 and 20 cents lower than in third quarter 2011.”

Those same trends helped J.B. Hunt Transport Services achieve second quarter net earnings of $80.5 million compared to $65.7 million in net earnings during the same quarter last year even though total operating revenue during the second quarter only increased slightly to $1.26 billion compared to $1.15 billion in the second quarter of 2011.

J.B. Hunt noted, however, that freight demand for its traditional truckload service is falling off. The carrier noted that while load growth of 13% and 16% occurred within its intermodal and Integrated Capacity Solutions (ICS) division, respectively – helping drive a 13% and 23% increase in segment revenue, respectively – its truckload revenue decline 3%. Hunt added that its Dedicated Contract Services (DCS) segment witnessed only a slight revenue increase of 1% in the second quarter.

Hunt added that its truckload rates per mile, excluding fuel surcharge, increased 3.2% in the second quarter this year, with rates from consistent shippers improving 2.5% compared to the same quarter a year ago – all helping make up for that 3% decline in TL revenues.

TL carrier USA Truck noted it its second quarter report that its revenue dropped 4.6% to $103.5 million compared to the same quarter last year, with base revenue decreasing 3.3% to $201.3 million for the first six months on this year compared to the same period in 2011. The company added that it lost $3.5 million in the second quarter, bringing total losses to $8.4 million for the first half of 2012.

“A less robust U.S. economy, particularly in manufacturing, depressed volumes,” noted Cliff Beckham, USA’s president and CEO. “Freight demand was not too weak for carriers with established networks to operate profitably. However, given our present network, the depressed volumes hindered our efforts to optimize our freight mix as there was less opportunity to obtain better loads.”

He added that though USA’s operational execution of manned tractors improved sequentially, its trucking operations took a step backward compared to the second quarter of 2011 as average trucking revenue per tractor per week declined approximately 9.2% to $2,546. “At 10.9%, our empty mile factor was the same in both the second quarter and the prior year's second quarter but showed material improvement sequentially,” he said. “Poor tractor utilization was the main inhibitor to performance.”

Indeed, both Werner and J.B. Hunt noted in their earnings reports that they don’t plan on increasing the size of their respective fleets anytime soon in part to such under-utilization.

“Throughout second quarter, we maintained our fleet at the 7,300 truck level or slightly higher [and] we intend to maintain our fleet size at approximately this level,” Werner stated.

Hunt noted that it’s operating 2,396 tractors in its pure truckload division versus 2,508 at the same time last year. 

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