There was no summer dip in freight demand at Werner Enterprises, which was “overbooked” throughout the third quarter. In fact, Werner’s revenue rose 1.8 percent from the second quarter and 8 percent year-over-year to $552 million. In the first nine months of 2014, the third-largest U.S. truckload carrier saw revenue expand 5 percent to $1.6 billion.
Excluding fuel surcharges, Werner’s trucking revenue rose 4 percent to $334.5 million. Revenue from the asset-light Value Added Services division rose 10 percent to $106.5 million. Werner’s net profit rose 22.2 percent from the 2013 third quarter to $26 million.
The $2 billion company expects to stay on a route to higher revenue, as rising freight demand and tightening truckload capacity put more upward pressure on shipper rates.
Trucking companies such as Werner outperformed the overall economy in the third quarter, as increased industrial activity and construction produced higher freight demand. At Landstar System, the fifth-largest truckload carrier, consolidated revenue in the first two months of the third quarter — typically a slower season for trucking — was up more than 20 percent year-over-year, Chairman and CEO Henry Gerkens told analysts in September.
“The freight market dynamics began showing year-over-year improvement for Werner in mid-November 2013, and that favorable trend has continued for the last eleven months, including the first three weeks of October,” Werner said in a statement. “A tight capacity market combined with a gradually firming economy were the primary contributing factors.”
Werner kept a tight grip on its own capacity, reducing the size of its fleet 2.6 percent year-over-year to 7,060 tractors at the end of the third quarter, while adding 25 trucks since the second quarter. On average, the Omaha, Nebraska-based carrier operated 6,974 tractors in the quarter, a 3.1 percent reduction from a year ago, but improved its fleet utilization.
More revenue-generating miles and fewer empty ones meant Werner was able to wring more productivity and profit from those trucks. Werner’s average trip length increased 6.7 percent to 475 miles, but average empty miles dropped 2.2 percent to 12.04 percent of total miles. Average miles per truck rose 5.3 percent, while average revenue per total mile rose 2 percent.
Average revenue per tractor per week rose 7.4 percent year-over-year, compared with a 4.9 percent increase in the second quarter and a 1.6 percent first quarter gain. Werner attributed the bigger increase to higher contractual rates and improved freight selection using a proprietary optimization system that focused on driver-friendly, profitable freight.
“We accepted less brokerage freight (in the third quarter) and instead supported our customers with additional capacity priced with a base rate per mile and a fuel surcharge per mile,” the company said. “We made good progress implementing sustainable rate increases with our customers. Strategic customers understand the collective capacity and service challenges facing our company and our industry.”
The biggest challenge facing Werner and other truckload carriers is finding and keeping qualified truck drivers. The carrier said it lost drivers early in the quarter, but reversed that trend when it hiked driver pay across its operations in mid-August by varying amounts, including a 14 percent pay increase for 48-state solo dry van truckload drivers. That increase is in line with driver pay raises at Swift Transportation, Schneider National and U.S. Xpress Enterprises, the largest, second-largest and sixth-largest truckload carriers.
“We expect competition for drivers will remain high in coming months,” the carrier said, thanks in part to competition from housing construction, manufacturing and hydraulic fracturing.