A weak market for industrial equipment is hurting Landstar System's flatbed business, according to the trucking company’s chairman, president and CEO.
The $2.8 billion motor carrier is unlikely to meet its $3 billion revenue target for 2013 absent a “dramatic turnaround” in its heavy haul business, Henry Gerkens said. “We’ve seen an increase in the rate of revenue deceleration” in the second quarter, Gerkens said on May 29. “Both truckload volume and revenue per load are weaker.”
Weaker second quarter sales of construction and agricultural equipment are taking a toll on manufacturers and the carriers that haul the heavy gear.
Unusually warm weather last year encouraged a surge in construction equipment orders, and wet weather this spring is dampening demand for machinery.
Deere & Co. said this month that worldwide construction equipment sales would decrease about 5 percent this fiscal year, although total equipment sales would rise. Construction and forestry equipment sales dropped 6 percent in the quarter ended April 30, largely because of lower shipment volumes, the manufacturer said.
At Landstar, revenue in the first eight weeks of the second quarter was lower than in the same period last year, Gerkens said, but gross profit margin improved. That indicates the carrier is getting better utilization from its network of owner-operators.
Gerkens said new driver work rules would have little effect on Landstar.
“I now anticipate revenue for the second quarter to be in a range of $660 million to $700 million,” he said. Revenue hit $734 million in the 2012 second quarter.
Landstar’s first quarter revenue dropped 3.2 percent year-over-year, to $628.3 million. That was still the carrier’s second-highest first quarter revenue.
Gerkens shared his views on the state of the U.S. economy, the trucking market and Landstar during a mid-quarter conference call with investment analysts. “Current economic forecasts indicate industrial production will increase in the back half of the year which should benefit our flatbed industrial-based business,” he said.