Top 50 Trucking Companies Rode Their Brakes in 2013

| Apr 16, 2014 2:36PM EDT

The United States’ largest trucking companies kept tapping their brakes in 2013, slowing revenue growth for the second consecutive year as the economic recovery remained a modest one.

The data behind The Journal of Commerce’s Top 50 Trucking Companies list, prepared by SJ Consulting Group in Pittsburgh, show just how much trucking’s biggest companies slowed down in 2012 and 2013, as freight demand and truck capacity settled into what shippers and carriers called a “rough equilibrium.” Weak freight demand left many trucking companies with little room to build revenue or raise rates in 2013.

Much of the expansion enjoyed by companies on the Top 50 list last year came from acquisitions — at least 11 of the Top 50 grew by buying up competitors. A few companies saw revenue drop after they sold or spun off subsidiaries to concentrate on core businesses.

However, the demand-capacity balance in place roughly since 2011 snapped in early 2014 as winter storms and unusually cold temperatures disrupted supply chains, revealing weak points in truck capacity and leading to capacity shortages and sharp rate hikes.

Shippers and carriers are asking whether 2014 will end up looking more like 2013 in terms of trucking demand and freight revenue, the trucking boom years of 2004 and 2005 or something in between.

Top 50 Trucking Companies in 2013

In 2013, the 50 largest motor carriers increased combined revenue by 5.5 percent to $106.6 billion, the second year in which the group had more than $100 billion in combined sales, according to Top 50 list. That 5.5 percent expansion marked the second year of decelerating growth for the group, which increased revenue at a slightly faster 6 percent rate in 2012, to $101 billion, according to revised figures from SJ Consulting. In contrast, the Top 50 carriers boosted combined revenue 9.3 percent in 2010 and 11.6 percent in 2011, the peak year in their recovery cycle.

SJ Consulting’s annual data provide a yardstick for measuring for-hire trucking growth. The Top 50 carriers have increased combined revenue 36.4 percent since 2009, when that figure plunged by $16.8 billion or 17.7 percent. Still, last year’s uptick in revenue was the second-lowest growth rate for the companies on the Top 50 list since 2003 — only 2008’s 4.4 percent increase was lower.

In contrast, 2011’s 11.6 percent expansion rate was the Top 50’s second-best, exceeded only by a 13.4 percent growth rate in 2004, the peak of the previous economic recovery.

As the economy tipped into recession in 2007 and 2008, excess trucking capacity that built up from 2003 to 2006 was exposed, and the high rates of the boom market plummeted. The trip back from the recession’s bottom in 2009 has been slow, especially as the economic recovery, after a decent start, remained erratic and modest.

The data from the 2013 Top 50 list underscore the broad impact a slower-moving economy has on the United States’ largest freight movers.

In the five-year recovery cycle that ran through 2008, the Top 50 added $32 billion in revenue to their top line — a stunning 50.9 percent increase. In the four years to 2013, the carriers gained $28.5 billion in revenue, a 36.4 percent rise.

If the Top 50 can add $3.5 billion in 2014, building sales up to about $109.7 billion — a goal that seems within reach based on economic conditions and motor carrier expectations — the 2009-14 recovery cycle would match the 2003-08 cycle, at least in terms of dollars. That would only require a 3.3 percent increase in Top 50 revenue in 2014.

Anything higher would make the 2009-14 recovery the strongest extended period of expansion for trucking since the 1990s, in terms of Top 50 revenue.

Unlucky Seven

In one sign of potential trouble, seven trucking companies in the Top 50 saw revenue drop in 2013, compared with four carriers in 2012 and one in 2011.

The last time revenue declined at seven of the Top 50 was in 2010, when many carriers were slow to accelerate after the 2008-09 recession.

Unlike 2009, however, lower revenue in 2013 doesn’t necessarily mean lower profit or an ailing company. Motor carriers are concentrating on improving their bottom-line profit, often at the expense of top-line revenue, and are increasingly willing to refuse business that doesn’t provide an adequate return. In 2013, carriers were more likely to cull low-profit accounts and reduce overall revenue to reserve space in their trailers for more profitable, higher-margin business.

In some cases, there were specific reasons companies saw revenue drop. SJ Consulting attributed a 15.1 percent year-over-year decline in revenue at Anderson Trucking Service, ranked 39th on the list, to a drop in wind turbine installations nationwide. U.S. Xpress Enterprises (ranked 13th), which sold regional truckload carrier Arnold Transportation last year, saw revenue fall 9.3 percent as a result.

However, 43 carriers on the list boosted revenue between 0.3 percent (YRC Worldwide, ranked 4th, which saw revenue drop 0.4 percent in 2012) and 61.9 percent (KLLM, ranked 41st, which merged with the truckload division of FFE Transportation, acquired by Duff Brothers Capital, owners of KLLM, last July). That compares with a pace ranging from 0.4 percent to 28.6 percent in 2012. The second-fastest growth rate in 2013 was 28.4 percent, at Central Transport International (ranked 44th), just below the top growth rate for the previous year.

Greater evidence of the deceleration in trucking’s expansion can be found in a comparison of how quickly carriers grew last year and the year before. In 2012, 20 trucking companies increased their revenue 5 to 10 percent; in 2013, only 13 carriers matched that pace. Last year, 17 carriers raised revenue 0 to 5 percent, compared with 13 in 2012. The number of companies increasing revenue 10 to 15 percent dropped by one to eight. Clearly, more carriers saw their annual growth rates slip last year. Three years ago, most Top 50 carriers increased revenue
10 to 15 percent.

Shifting to Slower Growth

The Top 50 subgroup that grew 0 to 5 percent last year increased revenue 2.6 percent on average — about the same as in 2012. The 17-carrier subgroup, however, included nine companies with more than $1 billion in revenue, including some of the largest carriers on the list: YRC Worldwide, Con-way (ranked 5th) and Schneider National (ranked 7th). Motor carriers with less than 5 percent growth year-over-year represented 23.5 percent of the total Top 50 revenue, or $25 billion, compared with 43.2 percent of Top 50 revenue, or $43.7 billion, in 2012. The big gap in those numbers is largely because UPS (No. 1 on the list) grew faster in 2013 than 2012, accelerating from 3.8 percent to 5.4 percent sales growth.

The 5 to 10 percent revenue growth subgroup boosted sales 7.6 percent on average. That’s faster than the previous year when the 20 carriers then in the subgroup increased revenue 6.8 percent on average. With 13 carriers, including the two largest, UPS and FedEx (No. 2), the subgroup accounted for 50.5 percent of Top 50 revenue, or $53.8 billion, in 2013, compared with 34.1 percent, or $34.6 billion, in 2012.

The subgroup that grew 10 to 15 percent increased revenue 11.3 percent on average, slower than in 2012 when the subgroup raised revenue 12.4 percent on average. Last year, the subgroup included multibillion-dollar carriers J.B. Hunt Transport Services (No. 3), Swift Transportation (No. 6) and Arkansas Best (No. 10), the parent company of ABF Freight System and Panther Expedited. NFI Industries (ranked 30th) had the fastest annual growth rate in the subgroup, 13.1 percent. The subgroup’s combined sales represent 13.8 percent of Top 50 total revenue.

Only two carriers grew at a 15 to 20 percent clip in 2013, bulk tank truck operator Kenan Advantage Group (No. 16), which raised revenue 18 percent, and same-day express carrier Dynamex (No. 36), which grew sales 19.2 percent from 2012. Their combined $1.9 billion in sales accounted for 1.8 percent of Top 50 total revenue. In 2012, the same subgroup was composed of Anderson Trucking Service (ranked 39th) and Acme Truck Line (ranked 49th), both of which saw revenue decline in 2013.

The number of carriers that boosted revenue between 20 and 30 percent was also small; two in 2013 and two in 2012. Roadrunner Transportation System (ranked 18th) was in that subgroup both years. Over the past four years, Roadrunner has increased revenue 170 percent, from $450 million to $1.2 billion, and often has been the fastest-growing carrier among the Top 50. Roadrunner expanded its top line 23.2 percent in 2013, 28.6 percent in 2012 and 35.1 percent in 2011, largely through acquisitions that built up its truckload business.

The fastest growing carrier last year, however, was KLLM, a refrigerated truckload carrier. KLLM’s revenue soared 61.9 percent last year as it absorbed the truckload division of refrigerated LTL hauler FFE Transportation. FFE was acquired by the owners of KLLM, private equity firm Duff Brothers Capital, last July.

The Biggest Got Bigger

An analysis of the Top 50 by five revenue classes — from $400 million to $600 million to more than $10 billion — reveals a greater concentration of revenue toward the top of the rankings and, again, slower growth, but faster expansion at the bottom of the rankings.

In the $10 billion-plus class at the top of the list, UPS and FedEx raised their combined trucking-based revenue 6.5 percent last year to a whopping $43.7 billion, according to SJ Consulting. Combined, the transportation giants increased trucking revenue by about $2.6 billion, the equivalent of a carrier about the size of UPS Freight, the fourth-largest LTL carrier.

The second revenue class, $1 billion to $10 billion, got bigger, as Roadrunner, Crete Carrier (ranked 22nd) and Averitt Express (ranked 23rd) all brought in more than $1 billion in trucking revenue in 2013, according to SJ Consulting (the research firm doesn’t include revenue from non-trucking sources, such as supply chain management, in its rankings, which is why listed Top 50 revenue may not match a company’s total revenue).

That brings the number of Top 50 companies with more than $1 billion in revenue to 23. That’s a remarkable change from 2003, when there were only 12 billion-dollar trucking companies among the Top 50, including UPS. 2013 was only the second year the $1 billion to $10 billion revenue class was the largest on the list.

The 21 truckload and LTL carriers in the class had $46.2 billion in revenue in 2013. That’s an 11.8 percent increase from the $41.3 billion the $1 billion-to-$10 billion revenue class had in 2012 — thanks to the inclusion of three new companies in the class.

The 21 carriers with between $1 billion and $10 billion in sales accounted for 43.3 percent of Top 50 revenue last year, compared with about 41 percent in 2012 and 2011. However, the subgroup increased sales 4.8 percent on average, compared with 8 percent in 2012.

The next revenue class, $800 million to $1 billion, included four carriers: Knight Transportation (No. 24), Southeastern Freight Lines (No. 25), Universal Truckload Services (No. 26) and Quality Distribution (No. 27). They increased combined revenue 7.1 percent on average to $3.5 billion, compared with a 12.4 percent increase to $3.8 billion for the same revenue class last year.

The $600 million-to-$800 million revenue class was a smaller group in 2013, as Averitt, Universal and Quality moved up a class, Vitran was acquired and Anderson dropped to the $400 million-to-$600 million class. That left eight carriers, from Trimac Group (ranked 28th) to Stevens Transport (ranked 35th).

The class raised revenue 6.6 percent on average to $5.6 billion, with NFI Industries and Celadon Group (ranked 33rd) growing by low double-digits. Last year, the larger subgroup expanded 8.3 percent on average and had $8.9 billion in revenue.

The number of carriers in the last revenue class, $400 million to $600 million, grew by two, to 15, last year, though three carriers from 2012 didn’t make the 2013 rankings: Interstate Distributor, United Vision Logistics and Dart Transit. Dynamex moved to the head of the revenue class, followed by Heartland Express.

The class, which includes KLLM, boosted revenue 9.6 percent on average — the best result among the five Top 50 revenue classes. Without KLLM’s contribution, the group would have increased revenue 5.9 percent on average, trailing the other two classes for carriers with less than $1 billion in revenue.

Contact William B. Cassidy at wcassidy@joc.com and follow him at twitter.com/wbcassidy_joc.