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Trucking scales back 1Q expectations

March 31, 2006
There are indications that first-quarter earnings of truckload and less-than-truckload carriers will represent relatively modest gains compared with the strong showings for the final quarter of 2005

There are indications that first-quarter earnings of truckload and less-than-truckload carriers will represent relatively modest gains compared with the strong showings for the final quarter of 2005.

YRC Worldwide has slashed its 1Q earnings guidance to $0.65 to $0.70 per share from its earlier estimation of $1.00 to $1.05. The LTL giant cited increased competition as a factor for weaker-than-expected revenue.

“Although our business levels remain ahead of last year, overall volumes for the quarter are projected to come in below our expectations across all of our asset-based business units,” said Bill Zollars, chairman, president & CEO of YRC Worldwide. “In addition to general competitive pressure, some of our large retail customers have made significant inventory adjustments in the quarter, which have impacted our business levels.

“Our view on the economy for 2006 has not changed, particularly based on apparent strength in the manufacturing sector,” Zollars added. “We are taking steps to adjust our cost base as necessary and address specific customer situations.”

Truckload refrigerated carrier Marten Transport, which mainly hauls consumer products, also lowered its earnings guidance to $0.19 to $0.22 per share. The company cited slower than expected customer demand.

Contrasting with these disappointing reports, package delivery giant FedEx has announced a 35% profit boost in the fiscal quarter ended Feb. 28 compared to the same period a year earlier. This was driven by a strong holiday shipping season and a strong economy, FedEx said. The company has raised its earnings guidance for the fiscal year ending May 31 to $5.66 to $5.81 a share, up from $5.45 to $5.70 a share.

Manufacturing, a key driver of trucking, remained strong, according to the Institute for Supply Management’s (ISM) Manufacturing Report on Business. In February, growth accelerated to an index of 56.7%, up from 54.8% in January. Next week, ISM will release its March data.

Retail sales in February dropped 1.3% compared with the previous month, dragged down mainly by cooling auto sales. Sales remained 6.7% above the same month last year, however.

The American Trucking Assns. said its seasonally adjusted for-hire Truck Tonnage Index fell 2.5% in February, breaking a rising trend seen over the previous five months which totaled 3.3%. ATA upheld its projection that the trucking industry will see decelerating growth in 2006.

About the Author

Terrence Nguyen

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