The first round of quarterly earning releases from motor carriers indicates mixed results, with some carriers indicating weaker freight volumes than the same period last year but others able to capitalize.
Van Buren, AR-based truckload carrier USA Truck Inc. today announced gangbuster profits that more than doubled over the same quarter last year, to $4.3 million from $1.3 million, respectively. “This quarter represents our strongest performance in six years, as we produced an operating ratio of 89.9%, and our base revenue net income, and diluted earnings per share were all higher than for any previous quarter in our public history,” USA Truck said in a news release.
These record earnings came despite the company experiencing marginally softer freight demand. USA Truck said it was more than able to compensate for this weakness through higher rates and expansion.
“Continued solid freight demand made it possible for us to increase the base revenue per mile for our traditional freight operations in which we used our own tractors by 3.5%,” the company stated. “Along with our 7.3% growth in our tractor fleet [that] paved the way for the record base revenue.”
But the expansion came with an inevitable brush with the driver shortage that goads the industry. “We are facing additional challenges of a tight driver market, high oil prices and a difficult regulatory environment,” said the earnings release.
Jacksonville, FL-based Landstar System today reported record-setting second quarter profits of $23.5 million. This marks a 33.5% increase over the same period last quarter.
“Revenue generated through truck brokerage increased 39% quarter over quarter,” said Landstar president & CEO Henry Gerkens. “In addition, operating margin improved by 120 basis points and diluted earnings per share increased 34%. We increased the number of available third-party truck capacity providers to 27,903, an increase of 1,083 since the beginning of the 2005 second quarter and 1,882 since the beginning of the year.”
Although fuel surcharges were excluded from revenue, the company did note that for the second quarter of 2005 it collected $49.3 million, compared to $22 million in the same period last year. The surcharges were passed 100% to business capacity owners (i.e. owner-operators).
However, not all carriers reported rosy earnings and revenues. Chattanooga, TN-based truckload carrier Covenant Transport said it expects disappointing earnings for its quarter ended June 30, 2005, which would follow a slack first quarter.
“The main factor affecting the quarter is a continuation of softer than expected freight demand,” said Covenant chairman & CEO David R. Parker. “As we said in April, freight demand would have to increase quickly for [Covenant] to meet its goal of improving the operating ratio versus 2004…our customer demand has not improved to the seasonal level we expected or needed. This is contributing to lower than planned tractor productivity.”
Other lagging factors are rising driver pay, higher fuel costs, and decreasing total miles.
Kansas City, MO-based SCS Transportation, which owns multiregional LTL carrier Saia LTL/TL carrier Jevic expects its earnings to be hurt by “on-going tonnage weakness” as well as by its own specific accident and court expenses.
Chris Brady, president of Commercial Motor Vehicle Consulting, told Fleet Owner that although the initial buzz on second quarter earnings may be mixed, he expects that carriers will report moderately improved earnings over the 2Q 2004.
“In general, you’d expect slower shipment growth compared to the same quarter a year ago,” Brady said. “But that’s because [2Q 2004] was really strong. That said, the freight environment should be relatively strong and it would support high truck utilization and keeping freight rates firm.
Satish Jindel, president of S.J. Consulting, concurs that there will be plenty of bright earnings reports to come. “I think you’ll find that companies coming out with earnings are going to be more in the camp of USA Truck and less with Covenant. Jevic is probably not meeting expectations but it’s because of its unique business model. You can’t use [Jevic] as a barometer for the industry. You’ll find that large players like Yellow and UPS will come out pretty good— they’re more of an indicator of what to expect [as more 2Q earnings are released.]”