The economic recovery, tenuous on Main Street and shaky on Wall Street, is surprisingly strong on the open road, where trucking companies are accelerating faster than the general economy and generating higher revenue and profits.
Rising industrial output, inventory restocking and stronger consumer confidence last year helped the largest U.S. trucking companies recover, in terms of revenue, from the recession, just two years after those companies skirted financial disaster.
The 50 largest U.S. motor carriers increased their combined revenue 11.6 percent to $95.6 billion in 2011, according to The Journal of Commerce’s list of the Top 50 Trucking Companies, based on data prepared by SJ Consulting Group. It was the best performance by the carriers on the list since 2004, when the group increased its revenue 13.4 percent after the 2001-03 recession.
The 11.6 percent increase followed a 9.3 percent rebound in 2010 and completed the group’s recovery from the economic collapse of 2009, when its combined revenue plunged 17.7 percent.
Overall, 2011 was a banner year for the companies on the Top 50 list. They surpassed their pre-recession revenue record of $94.9 billion, set in 2008. Over the past two years, the Top 50 carriers increased combined revenue 22.5 percent, more than recouping the $16.8 billion they shed in 2009. The annual financial data compiled by SJ Consulting also provide a yardstick for measuring trucking’s long-term growth. Since 2003, the first year for which data are available, the Top 50 list has increased total revenue 52.2 percent from a base of $62.9 billion.
That long-term expansion probably means truckers not only are handling more freight, but the largest carriers also are hauling a larger share of valuable goods.
As large as they are, the Top 50 trucking companies represent a fraction of the more than 227,000 for-hire carriers registered with the Department of Transportation. Only 7 percent of U.S. motor carriers operate more than 20 trucks, according to the American Trucking Associations, and 88 percent operate six or fewer trucks.
But the Top 50 list represents a significant number of the largest trucking companies and the capacity accessed by the country’s largest shippers, making the list a bellwether for the fortunes of the trucking industry. And, if trucking is a forward-looking indicator, the Top 50 carriers are at the forefront of that measure.
The Top 50 list includes motor carriers that already are enjoying the “trucking renaissance” predicted in 2010 for companies that successfully balance costs, pricing and capacity to achieve sustainable profitability and revenue growth. That renaissance is apparent in wider profit margins and lower operating ratios.
Companies leading the way include less-than-truckload carrier Old Dominion Freight Line, which had an 87.6 percent operating ratio in 2011, truckload carrier Knight Transportation, which had an 85.4 percent OR, and Heartland Express, with an 82.4 percent OR and 12.3 percent net margin in the first quarter.
Trucking’s recovery in 2011 owed as much to higher pricing, better yield management and tight capacity as it did to higher freight volumes. But shipping demand, measured in terms of for-hire truck tonnage, increased 5.8 percent in 2011, matching the gains of 2010, according to the ATA.
In some respects, 2011 may be a tough year to follow. Publicly owned trucking companies already are confronting tougher year-over-year comparisons in pricing, volume and yield. Higher and increasingly volatile energy prices and rising labor, equipment and regulatory compliance costs are squeezing carriers.
The growth rate in the ATA For-Hire Truck Tonnage Index is slowing as well, dropping from 5.5 percent year-over-year in February to 2.7 percent in March.
But the nation’s largest carriers are, for the most part, a confident bunch. Early first quarter results from companies such as J.B. Hunt Transport Services and Werner Enterprises show why. J.B. Hunt’s net profit rose 35 percent in the first quarter from a year earlier to $67.7 million, while Werner’s net profit jumped 30 percent to $21.5 million. Refrigerated carrier Marten Transport increased its net profit 33 percent year-over-year to $5.4 million.
Those double-digit gains were built on single-digit revenue growth, a sign carriers are managing money better.
The recovery experienced by the Top 50 list in 2011 was increasingly broad-based, as gains made by truckload carriers in 2010 spread to the LTL side of the business.
The 11.6 percent revenue gain among the Top 50 matches the average revenue increase for the Top 25 LTL carriers reported in the March 19 Journal of Commerce. LTL carriers on the Top 50 list increased revenue at an even higher rate, 13.4 percent on average, while truckload revenue grew 14.1 percent.
That’s a sign the excess capacity that slowed the LTL recovery after the recession is going fast or already gone. LTL carriers aren’t just shedding terminal doors, though some companies have redesigned their networks over the past two years. LTL and truckload capacity increasingly depend on the same basic unit of measurement: the worker.
Carriers need more dock workers and drivers to take on more freight, and the hiring rate in trucking is slowing. In January, trucking employment jumped 4.1 percent year-over-year, but growth slowed to 3.7 percent in February and 3.2 percent last month, according to data from the U.S. Bureau of Labor Statistics. Slower hiring will help keep capacity tight and push truck pricing upward.
A deeper analysis of the data behind the Top 50 list reveals how broad an improvement the Top 50 carriers enjoyed in 2011. Altogether, 16 companies advanced to a higher revenue category. Three carriers broke past the billion-dollar revenue mark in 2011, four moved into the $800 million to $999 million revenue category, six surpassed $600 million and three, $400 million in annual sales.
There were no motor carriers on the list with less than $400 million in annual revenue for 2011, compared with four companies in 2010 and six in 2009.
The strong improvement in annual revenue in 2010 and 2011 points to a more robust industrial recovery than U.S. unemployment statistics might indicate.
Only one company on the Top 50 list saw revenue decline in 2011. Compare that with 2009, when only one company increased revenue. Last year, 49 carriers on the Top 50 list increased revenue from 0.4 to 35.1 percent. In 2010, a smaller group, 42 carriers, increased sales, and at a softer rate, 1.2 to 28.9 percent.
In 2009, revenue dropped by as much as 42 percent at all but one trucking company on the list, truckload carrier Prime. According to SJ Consulting, Prime increased revenue 10.8 percent in 2009, 15.7 percent in 2010 and 18.3 percent in 2011.
Only privately owned Shevell Group saw its revenue drop in 2011, falling 0.2 percent. That was an improvement over last year, when the parent of New England Motor Freight saw revenue drop 4.7 percent, according to SJ Consulting data.
A lower growth rate in 2011 didn’t always mean lower profit, just as higher revenue didn’t always translate to more income. Some companies, such as Con-way, increased revenue at a slower pace last year as they culled more low-priced freight from their networks and rebuilt profits. YRC Worldwide returned to growth in 2011 after its revenue plunged by more than half since 2006, but the company is still losing money.
In 2011, the Top 50 carriers ranged from UPS, with about $24.8 billion in freight and ground package revenue, to Central Refrigerated Service, a $419 million temperature-controlled truckload carrier. (SJ Consulting Group only included trucking and ground package revenue in its data. For example, including international express and supply chain revenue, UPS is a $53.1 billion company.)
Truckload carrier C.R. England, dedicated and brokerage operator Greatwide Logistics and LTL company Saia crossed the billion-dollar revenue threshold, bringing the total number of Top 50 carriers with more than a billion dollars in revenue to 18. Those 18 carriers had combined revenue of $75.9 billion, a 15.5 percent increase from last year and 80.4 percent of the total Top 50 revenue.
In addition to UPS and FedEx (and their trucking subsidiaries), the only companies on the list with more than $1 billion in annual revenue, the “billion-dollar club” includes seven companies with $2 billion to $5 billion in sales: YRC Worldwide, J.B. Hunt Transport Services, Con-way, Swift Transportation, Schneider National (the largest privately owned trucking operator in the U.S.), Landstar System and Werner Enterprises. The nine companies with $1 billion to $2 billion in trucking revenue were ODFL, Arkansas Best (owner of ABF Freight System), Estes Express Lines (the largest privately owned LTL carrier), U.S. Xpress Enterprises, R+L Carriers, Prime, C.R. England, Greatwide and Saia.
Six companies made the $800 million to $999 million revenue category: Kenan Advantage Group, Crete Carrier, Averitt Express, Knight, CRST International and Southeastern Freight Lines. Eight carriers were listed in the next category, with $600 million to $799 million in revenue: Roadrunner Transportation, Universal Truckload Services, Vitran, Ruan Transportation Management, Covenant Transport, Trimac, Quality Distribution and Ryder System.
The number of carriers with less than $600 million in revenue dropped by five to 18, as the largest of the Top 50 carriers not only got larger but also grew more quickly.
Related: Slow Ride for Dry Van Operators.
Ten companies increased revenue more than 20 percent, with Roadrunner, a hybrid LTL and truckload company, growing at the fastest clip, 35.1 percent. Seven companies increased revenue 15 to 20 percent, and another 20 companies increased revenue 10 to 15 percent. Only 12 companies on the list raised revenue less than 10 percent in 2010.
In 2010, only six companies increased revenue 20 percent or more, eight by 15 to 20 percent and 14 boosted revenue 10 to 15 percent. That left 14 carriers that increased revenue less than 10 percent, and eight that saw revenue drop.
Unlike prior years, the balance between the carriers by type seemed stable in 2011, as truckload and LTL carriers focused on bottom-line profit rather than top-line market share gain. Although parcel and same-day carriers represented only 6 percent of the Top 50 carriers numerically, they accounted for 41.2 percent of the group’s revenue, down slightly from last year as a percentage of the whole. Truckload carriers represented 66 percent of the companies and accounted for 37.1 percent of the revenue, up 1 percent from a year earlier. LTL carriers accounted for 28 percent of the group and 21.8 percent of the revenue, about the same as 2010.