An uneven, anemic economic recovery, spending cuts driven by the federal sequester and winter storms all threw up roadblocks for trucking operators in the first quarter, slowing the industry’s drive toward greater profitability. Profit margins contracted at some of the public trucking companies tracked by The Journal of Commerce Trucking Dashboard as higher operating costs, coupled with weak demand, constrained earnings growth.
Even so, profits at only eight of the more than 20 companies tracked by the JOC declined from the first quarter of 2012, and only four companies suffered first quarter losses: less-than-truckload carriers ABF Freight System and Vitran Express and truckload carriers Covenant and USA Truck.
The return of two carriers to profitability from first quarter 2012 losses — LTL competitors FedEx Freight and YRC Freight — showcases the resiliency and fiscal discipline trucking is developing as the economic recovery slowly unfolds.
Old Dominion Freight Line was the most profitable LTL carrier, with profits representing 7.6 percent of its revenue, followed by Roadrunner Transportation, with profits representing 6.7 percent of LTL sales. Heartland Express had a 14.7 percent profit margin, leading the truckload carriers.
The drop in profit at other carriers, however, underscores how difficult it is for many companies to balance slow or uneven growth in demand and rising expenses. Sector average operating ratios show the impact of higher costs, with the average LTL operating ratio ticking up 1.3 percentage points and the truckload ratio rising 1.9 points.
Yield gains were lower as well, and more reliant on pricing increases than fuel surcharges in the LTL segment. LTL yield increased an average 3 percent in the quarter, while the average truckload revenue per tractor per week increased 3.5 percent from a year earlier. Those figures fell within the 2 to 4 percent increase many transportation analysts foresee for truck pricing this year.
Freight demand measured by year-over-year change tonnage jumped in January but declined in February before rising in March and April, according to American Trucking Associations’ data. Tonnage rose 3.9 percent on average in the first quarter, flat compared to a year earlier.
“Truck tonnage has been bouncing around a narrow, but elevated band over the last three months,” ATA Chief Economist Bob Costello said in May. Truckload capacity at the largest carriers remains tight, with the revised JOC Truckload Capacity Index flat from the last quarter at 79.7, indicating capacity is 20 percent below its 2006 peak level.
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