Data from third-quarter earnings reports from across the industry indicate that trucking may be reaching a bottom of sorts, with freight volumes beginning to rise but without a corresponding increase in revenues – at least not yet.
“We have experienced a steady, albeit modest, sequential increase in load volumes as the year has progressed,” said Kevin Knight, chairman & CEO of Knight Transportation, in the carrier’s third-quarter earnings statement. “But although we have experienced sequential improvement in freight demand, it is not at a level to significantly influence higher rates.”
Knight’s net income for the third quarter dropped 18.1% to $13.1 million on 3.6% lower overall revenues of $150.2 million, compared to the same period in 2008. Year-to-date, Knight’s net income is down 6.7% to $37.4 million on 5.4% lower revenues of $427.6 million compared to the same nine-month period in 2008.
The carrier also reported that equipment productivity, as measured by average revenue before fuel surcharge per tractor in the quarter, was down 4.5% from the third quarter last year. Yet that is far better than the 8.1% decline in productivity that the carrier recorded in its second quarter year-over-year comparison. And though average length of haul decreased 10.7% to 465 miles from 521 miles in the third quarter of 2008, Knight’s non-paid empty mile percentage decreased to 11.8% from 11.9% in the same quarter-to-quarter comparison.
On the positive side, Knight reported that total loads hauled in the third quarter this year increased by 10.2% when compared to the same period in 2008. Though, when placed against revenue declines, they are getting paid a lot less to haul freight, that positive uptick in volumes remains a good sign – and if and when those volumes start exceeding available capacity, revenues should start to rise.
“We believe yields in the industry will not improve until capacity more closely meets demand, which could occur through either a significant improvement in the U.S. economy or through additional industry consolidation,” said Earl Congdon, executive chairman of LTL carrier Old Dominion Freight Lines. “Until such time, we anticipate continued pressure on our yields.”
Old Dominion said its net income of $10.5 million on revenues of $322.8 million in the third quarter this year is down by more than half compared to the $25.2 million in net income earned on revenues of $415.9 million in the same period last year. “We believe shippers will continue the trend of consolidating their transportation needs with carriers that are capable of providing comprehensive and integrated services,” Congdon added.
“It came as no surprise that our results continued to be negatively impacted in the third quarter as a result of the global economic recession,” said Bruce Campbell, chairman, president & CEO of Forward Air Corp., which specializes in airport-to-airport truckload shipments.
“The pricing environment, which began to deteriorate late in the first quarter, has remained extremely challenging but has shown signs of stabilization,” he said. “The final weeks of the quarter saw a sequential firming up of our airport-to-airport network tonnage that has continued thus far into October. [Also], our TLX truckload brokerage group that saw revenue declines in the second quarter appears to have curtailed that slide with September revenues coming in flat compared to last year.”
Forward Air’s net income declined by almost two-thirds to $3.8 million on 15.1% lower revenues of $103.1 million in the third quarter this year, compared to net income of $12.1 million on $121.5 million in the same period in 2008.
“The third quarter proved to be more challenging than originally anticipated … as the peak retail season did not occur in September as forecasted by our customers,” Campbell noted. “However, these first few weeks of October volumes indicate the beginning of a somewhat normalized fourth quarter. Again we will monitor this trend with cautious optimism.”
That being said, most carriers don’t expect the rough economic waters to recede anytime soon in trucking. “There continues to be evidence that many, if not most, truckload carriers are plagued with weak balance sheets, aging fleets and shrinking revenues,” said Knight.