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Outlook brightening for owner-operators

Nov. 10, 2017
Capacity shortage and new technologies are viewed as growing advantages for independents.

By American Trucker staff

A busy holiday season combined with rising overall freight demand and tightening trucking capacity that’s a direct result of a growing shortage of truck drivers is generating more profitable opportunities for owner-operators in the eyes of some industry experts.

“Technology is expanding market opportunities to owner-operators by giving them transparency on market pricing and access to loads, which further challenges large [motor] carrier driver retention” efforts, noted John Larkin, managing director and head of transportation capital markets research for Stifel Capital Markets, in a recent research brief.

“Brokers and load boards are offering owner operators not just back-haul freight, but also ‘the next haul’; that is, attractive freight that is not simply used when empty miles need to be filled,” he added.

That’s a trend all motor carriers, large and small alike, are benefitting from, noted Mark Rourke, chief operating officer for TL carrier Schneider in the company’s third quarter earnings conference call.

“Freight demand is also up across board, freight demand improved and capacity supply tightened throughout the third quarter as reflected in increasing spot and contract rate environment as well as asset utilization gains,” he said.

“I think the customer community and the carrier communities’ interests are highly aligned here to make sure that there is adequate capacity both in the short-term, which we are in a robust period, but also what’s envisioned to come in 2018,” Rourke noted.

“Between the storms [Hurricanes Harvey Irma and Nate], an improving economy and an historical surge in demand in the back third of the year, we’ve seen good movement in pricing across the board including spot rates, fall premiums, and contract rates,” added Chris Lofgren, Schneider’s CEO.

“We have a continued confidence in our view that tightening supply and demand dynamics are benefiting freight transportation and logistics companies, broadly defined,” Stifel’s Larkin added “It is our belief that we are in a period of time where transportation companies are well positioned to outperform the market, given the prospect of accelerating revenue growth, expanding margins, and strengthened balance sheets,” he said.

One good example of that bullish outlook comes from Landstar System, which relies exclusively on owner-operators – whom it refers to as “business capacity owners” or “BCOs” – to haul freight.

“Overall, the third quarter operating environment was outstanding. We saw significant increases in both the number of loads being hauled by truck and revenue per load,” noted Jim Gattoni, Landstar’s president and CEO, during the company’s third quarter earnings call.

“We’ve been experiencing a strong, broad-based demand for our services,” he added. “I expect this environment to continue to strengthen into the end of the fourth quarter, with industry-wide growth in e-commerce and the ELD [electronic logging device] mandate taking effect towards the back half of the fourth quarter.

He noted that Landstar experienced an “above-normal” seasonal uptick in revenue per load on loads hauled via truck between the second and third quarter, attributable what Gattoni called “a more balanced truck market” followed by the rapid tightening of the truck capacity in September.

As a result, for the first time in Landstar’s history, it issued quarterly revenue guidance that is over $1 billion at the upper end of the range. That’s for the fourth quarter this year, Gattoni said.

“Our third quarter results established numerous financial records, as the company set all-time quarterly records for revenue, gross profit, operating income and diluted earnings per share from continuing operations,” he explained.

And Gattoni expects the freight conditions will remain strong at least for the near future.

“We expect the capacity crunch coming into the end of the year between the drive of ecommerce that starts at about mid-November and ELD mandate,” he said. “I would think that this crunch is going to continue at least into the first quarter; it’s going to continue through at least the next three months.”

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