The for-hire U.S. trucking industry took a detour around economic fears in the third quarter, as year-over-year increases in freight volume and rates strengthened less-than-truckload and truckload carriers. But top-line and bottom-line growth slowed from the second quarter at some carriers as rising costs squeezed profit margins.
Many companies that were struggling with losses last year were back in the black in this year’s most recent quarter. That included Swift Transportation, the nation’s largest truckload carrier. Swift, which lost $1 million in 2010’s third quarter, improved its net profit 58 percent from the second quarter to $30.9 million. The carrier’s revenue rose 13.9 percent from a year earlier to $864 million, and was up from $850 million in the second quarter.
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Among the publicly owned LTL carriers, ABF Freight System and FedEx Freight recovered from year-earlier losses to post profits of $18.3 million and $42 million, respectively. ABF more than doubled its profit from the second quarter, while FedEx Freight’s net income was flat sequentially. YRC Worldwide’s regional carriers continued to build profitability, but nationwide carrier YRC fell back into the red.
FedEx Freight’s industry-leading $1.3 billion in revenue was up 6 percent year-over-year. Roadrunner Transportation System was the fastest-growing LTL carrier in the quarter, with a 38.2 percent year-over-year leap in revenue to $226 million, fueled by several acquisitions in 2011. Old Dominion Freight Line expanded its top line almost 25 percent by increasing quarterly revenue to $495 million.
Costs rose for carriers on a number of fronts: fuel, equipment, parts, including tires, and labor, especially health care costs. That ate into the gains trucking operators made in pricing year-over-year. Rates rose as high as the mid-single-digits, on average, for many carriers, as LTL and truckload yield gains indicate. Many LTL carriers initiated early general rates increases ranging up to 6.9 percent in the quarter. Multiregional LTL carrier Saia nearly doubled its net profit in the third quarter from a year earlier, but said higher rates are needed to counter higher health care, equipment maintenance and purchased transportation costs.
Trucking companies and shippers uncertain about the economic outlook hope slow growth won’t slip back into a double-dip recession, as economists at the Economic Cycle Research Institute predicted in October. Early reports on freight trends at some carriers pointed to continued steady freight demand in October.
Any increase in freight demand is likely to push rates higher in the fourth quarter or 2012 as carriers will be slow to add capacity unless they achieve a higher return on investment to pay for more expensive equipment and cover other costs.