Finding profit
Year-end earnings reports from some of the largest TL and LTL carrier sectors indicate that most are successfully finding ways to profit from a still sluggish to moderate freight environment. Even long-suffering LTL conglomerate YRC Worldwide posted consolidated operating income profit—some $24.1 million in 2012—for the first time in six years, even though its total revenues slipped 0.4% to $4.851 billion compared to 2011.
“The improvement in profitability is the result of intense focus on productivity improvements at each individual terminal and the continuation of our strategy to improve our customer mix,” noted Jeff Rogers, president of YRC Freight, in the carrier’s year-end fiscal report. “We have made solid gains in customer service, safety and freight handling efficiencies, and now our financial results are starting to tell the story.”
While many trucking companies and industry experts believe the freight market going forward will be tepid this year at best, expectations remain for higher rates as trucking capacity should continue tightening as the year progresses.
Werner Enterprises, for example, pointed out that while freight demand in the first three weeks of the fourth quarter last year stayed steady, it did not show typical seasonal improvement.
“Freight demand was softer in the fourth quarter of 2012 compared to relatively strong demand experienced in the fourth quarter of 2011,” the carrier noted. “In the fourth quarter of 2012, customers were generally more cautious with their shipping volumes and tightly managed inventories during this period of economic and fiscal policy uncertainty.”
As a result, Werner said its revenues for 2012 stayed flat at a little over $509.6 million, while net income declined 12% to $25.9 million compared to 2011.
“The environments in both 2012 and 2011 were similar in terms of growth [while] the economic environment continued in the lukewarm fashion we have become accustomed to,” stated Knight Transportation in its year-end earnings statement, noting that its net income jumped 1.3% to over $17.6 million on 8.1% higher revenues of over $242.3 million in 2012 vs. 2011.
Such signals are further proof to John Larkin, managing director of the transportation and logistics research group of Wall Street firm Stifel Nicolaus, that freight traffic levels, which subsided starting in June of last year, have yet to fully recover.
“Lean inventories remain across many supply chains,” he observed during the company’s fourth annual Transportation & Logistics Conference in February. “These lean inventories create frequent spot market and short-lived opportunities for carriers, but reflect retailers’ cautious stance in light of the uncertainties that have [slowed] our economic recovery.”
“In my opinion, there remains much economic uncertainty,” noted Henry Gerkins, chairman, president and CEO of Landstar System. Despite posting what he called “very good” full-year operating results for 2012, Gerkins remained mum on how Landstar might perform in 2013 because of those broader macroeconomic concerns. “I will not be providing specific ranges of 2013 first-quarter and full-year revenue and earnings projections at this time,” he said.
Landstar reported over $2.79 billion in annual revenue for 2012 compared to just over $2.64 billion in 2011, with earnings per share jumping to $2.77 versus $2.38 in 2011. It also posted a 4% jump in its 2012 operating margin to a record 46.2%. Yet Larkin said all of the carriers making presentations at the firm’s annual conference believe that pricing should continue to rise in the low single-digit range year-over-year.
