Roadrunner Transportation Services extended its streak of rapid profit growth for the 14th consecutive quarter in the fourth quarter of 2013.
Cudahy, Wis.-based asset-light transportation and logistics service provider reported its net profit available to common stockholders in the fourth quarter of 2013 was $11.2 million, increasing 17.7 percent year-over-year from $9.5 million. The company’s profits have grown by double or triple digits every quarter since the second quarter of 2010.
However, Roadrunner, No. 15 on JOC’s list of the Top 25 Less-Than-Truckload Carriers, posted earnings per share of $0.29 in the fourth quarter, below analysts’ consensus estimate of $0.32, according to Stifel Transportation & Logistics Research Group.
Quarterly revenue was $367.0 million, up 24.4 percent from $295.1 million in the same period in the previous year, as a result of “organic and acquisition-related revenue growth,” Roadrunner said. The company expects revenue to increase by as much as 25 percent in the first quarter.
The company noted that it experienced “unfavorable claims developments” during the last quarter, resulting in additional expenses of about $3.8 million. In the fourth quarter earnings call, transcribed by Seeking Alpha, Peter Armbruster, CFO of Roadrunner, mentioned that the increased cost of insurance claims both in the quarter and full year of 2013 was an industry-wide trend not unique to Roadrunner. He noted that the company is taking steps to mitigate accidents.
Roadrunner said its revenue growth and operational efficiencies were also negatively impacted by severe weather in the U.S. in December and compliance with new hours of service rules. Although company management highlighted several items that hurt the company’s quarter that were unusual, non-recurring or “just a new speed bump,” Stifel said it believes that some of the headwinds were not one-time and will not disappear in 2014.
Revenue from the LTL division in the fourth quarter rose 4.4 percent to $135.5 million, from $129.9 million in the fourth quarter of 2012. Roadrunner said its recently opened LTL terminals “continued to perform well” in the fourth quarter and contributed to most of its LTL revenue, although these terminals had lower “freight density” and net revenue margin compared with legacy terminals.
“Until our recently opened LTL terminals can build sufficient density to send loads direct to the final destination, the new terminal loads will be combined with our legacy terminal loads resulting in double handling and redundant dock costs,” Mark DiBlasi, president and CEO of Roadrunner, said in a statement. “These issues resulted in our LTL operating ratio deteriorating from 94.9 percent in the fourth quarter of 2012 to a 96.1 percent in the fourth quarter of 2013.”
Quarterly revenue from the truckload segment improved 25.6 percent to $180.1 million, from $143.4 in the same quarter in the previous year, driven primarily by increased load growth, increased utilization of Roadrunner’s truckload brokerage agent network and the acquisitions of Central Cal, A&A, DCT, Wando Trucking, TA Drayage, G.W. Palmer Logistics and Yes Trans, according to the company. For the fourth quarter, these acquisitions collectively contributed truckload revenue of $31.6 million.
However, truckload’s operating ratio deteriorated from 92.8 percent in the fourth quarter of 2012 to 93.6 percent in the fourth quarter of 2013 because of severe weather; “sluggish” economic conditions; increased costs associated with the hours of service regulations; a “flat” pricing environment; new management personnel; and a greater percentage of truckload revenue growth in truckload services and drayage, which have lower operating margins than warehousing, Roadrunner said.
In JOC’s Annual Review & Outlook 2014, DiBlasi said the underutilization of equipment, drivers, tractors and trailers has kept pricing down “significantly,” allowing shippers to benefit from the readily available capacity and low rates.
Revenue from transportation management solutions in the quarter spiked 130.0 percent year-over-year to $54.7 million, from $23.8 million, primarily because of the Adrian Carriers and Marisol International acquisitions, Roadrunner said.
In December 2013, Roadrunner named Brian van Helden as chief operating officer, replacing Scott Dobak, who resigned. In the earnings call, DiBlasi said the company is now looking for an executive vice president of sales to look at Roadrunner’s overall corporate sales performance.
For the full year of 2013, net income available to common stockholders was $49.0 million, jumping 30.6 percent from $37.5 million in 2012 and 89.4 percent from $25.9 million in 2011. Annual revenue was $1.36 billion, up 26.8 percent from $1.07 billion in 2012 and 61.4 percent from $843.6 million in 2011.
Peter Armbruster, CFO of Roadrunner, commented on the company’s 2014 guidance: “We anticipate our revenues for the first quarter to be in the range of $350 million to $375 million, representing an increase of 17 percent to 25 percent from the first quarter of 2013.”
In the earnings call, Ambruster also mentioned the company expects truckload brokerage, truckload services and drayage business to continue to grow at a rate greater than its warehousing business.