Growth explodes for Top 25 truckload, LTL carriers

Growth explodes for Top 25 truckload, LTL carriers

The combined revenue of the 25 largest US LTL carriers climbed 10.7 percent to $38.7 billion in 2018, while total truckload revenue rose 13.7 percent to $31.9 billion. Photo credit: Shutterstock.com.

The US trucking industry hit the economic accelerator so hard last year some fear a hard-braking event ahead. So far in 2019, however, most trucking companies and their shipper customers have been able to shift gears successfully as they prepare for a spring retail freight surge that may tighten capacity in a market still shocked by last year’s chaotic first half.

From January through July of 2018, strong freight demand driven by US economic expansion and concerns over US tariffs and trade wars collided with high truck utilization rates and tighter regulation of truck drivers, shooting truck pricing into the stratosphere, with contract rates rising by high single digits on average and spot truckload rates by double-digit percentages.

That spurred double-digit revenue growth at the largest US less-than-truckload (LTL) and truckload carriers last year as industrial production, consumer spending, and freight volumes rose. For truckers, “it was the year of Christmas,” said Satish Jindel, president of SJ Consulting Group, Warrendale, Pennsylvania. If so, truck shippers wound up footing the Christmas bill.

Shippers hope for some relief in 2019 after a budget-busting 2018. “The good news is 2018 has ended,” Coca-Cola CEO James Quincey said while discussing transportation rates during a Feb. 14 earnings call. “While freight costs are expected to remain above historical levels, we do not expect to see the same level of year-over-year increases as we saw last year.”

2018 a great year

Those increases fueled significant revenue growth at truckload and LTL companies. The combined revenue of the 25 largest US LTL carriers rose 10.7 percent in 2018 to $38.7 billion after rising a revised 8.7 percent in 2017 and flattening in 2016 at $32.1 billion. That’s a 20 percent jump in revenue over two years, with the biggest gains in 2018, according to the JOC.com annual ranking of the Top 25 US LTL Carriers, prepared by SJ Consulting Group. Last year’s 10.7 percent growth rate was the highest for the Top 25 LTL carriers since 2011, when they grew 12.4 percent after a 9 percent post-recession revenue jump in 2011.

Overall, the LTL sector increased revenue 10.4 percent last year, pushing past the $40 billion mark for the first time to $42.6 billion. That milestone reflects the strength of the US manufacturing economy, which has been expanding for 118 months, as well as consumer spending, which increased by $54.4 billion, or 0.4 percent, last November alone. For LTL and truckload carriers alike, e-commerce and imports played a role in expanding topline revenue.

Smaller LTL companies — those that didn’t make the Top 25 rankings — saw revenue growth slow, likely as the 25 largest LTL carriers pulled some revenue from them. Those smaller trucking companies, probably hundreds if not thousands of local carriers, raised their combined revenue 8.2 percent to about $4 billion, about 9.3 percent of total US LTL industry revenue.

 

In the previous year, those companies increased revenue 8.5 percent, following years of shrinking revenue as a result of industry consolidation and the continued expansion of the 25 largest LTL companies, which boast annual revenue ranging from $226 million (Oak Harbor Freight Lines) to $7.4 billion (FedEx Freight), according to SJ Consulting Group data.

Truckload revenue rose more quickly, with the revenue growth rate of the 25 largest truckload carriers rising 13.7 percent as their combined revenue reached $31.9 billion, according to the 2018 ranking of the Top 25 Truckload Carriers, also prepared by SJ Consulting. That’s a 21 percent increase in combined revenue for those carriers in a two-year period.

The Top 25 truckload carriers represent a fraction of the truckload market, which is dominated by companies with fewer than 100 trucks. But the 25 largest fleets command significant capacity, fielding large fleets that haul high volumes of freight for the largest US shippers. The 25 largest carriers in both trucking sectors increased their combined revenue 12.1 percent to $70.6 billion in 2018, a 20.7 percent increase over the $58.5 billion they shared in 2016.

 

 

 

Rising tide lifts top lines

Among the Top 25 LTL carriers, 11 companies increased revenue by double-digit percentages, from Old Dominion Freight Line, which saw revenue jump 20.6 percent to $4 billion, to Pitt Ohio Transportation Group, which increased revenue 10.7 percent to $616 million. Another 11 LTL companies advanced revenue anywhere from 3 to 9.5 percent. The Top 25 truckload carriers included 15 companies that enjoyed double-digit growth, led by flatbed operator Daseke.

The Addison, Texas-based company lifted its revenue 91.3 percent to $1.3 billion, according to SJ Consulting Group, through multiple acquisitions in 2017 and 2018. That makes Daseke, launched with only $30 million in revenue in 2009, the fastest-growing carrier in either of the Top 25 rankings for 2018. The next 14 truckload carriers boosted revenue from 11.2 to 31.9 percent.

Alongside the rise in double-digit growth, the drop in the number of Top 25 carriers that saw revenue decline in each of the past two years is a clear measure of how much trucking’s health has improved. In 2016, during an industrial downturn, 26 of the 50 largest truckload and LTL companies saw their revenue drop. In 2017, that number fell to six; last year just five carriers saw a drop in revenue.

Only two of the Top 25 truckload carriers — Swift Transportation and Celadon Group — saw revenue decline last year. Swift’s revenue dropped 5.9 percent to $3.14 billion, as the Phoenix-based company culled its fleet and improved profitability. Swift’s truckload operating ratio for the full year was 86.6 percent, but in the fourth quarter the carrier pushed its operating revenue down to 78.8 percent, and even lower to 75.9 percent after adjusting for fuel surcharges.

Celadon’s revenue dropped 11 percent last year to $762 million. The Indianapolis-based company began an end-to-end restructuring in 2017, reducing its truckload fleet by 20 percent and replacing top management after uncovering significant financial reporting errors.

One of the three Top 25 LTL carriers that took in less revenue in 2018 was Northeast regional trucking firm New England Motor Freight, which filed for bankruptcy protection in February and shut down. In its bankruptcy filing, the company stated it had $343 million in revenue in 2018, down from $345 million in 2017, and a $20.9 million aggregate operating loss.

Roadrunner Freight, which saw LTL revenue drop 1.2 percent, was another of the three. Parent company Roadrunner Transportation recently completed a $450 million rights offering that transferred ownership of most of its stock to Elliott Management, the activist investment group led by Paul Singer.

Central Freight lines of Waco, Texas, was the third LTL carrier with lower revenue, dropping two places in the rankings as revenue fell 5.7 percent to $248 million.

Although it may seem counterintuitive, lower trucking revenue isn’t always a bad sign. In many cases, both LTL and truckload carriers have reduced their fleet size or freight volume and subsequently sacrificed top-line revenue as a means to improve bottom-line profitability.

“In some companies, there was a lot of discipline,” Jindel said. Many of the carriers that had growth rates lower than the average for their sector “did it by largely trying to improve the revenue per shipment where the market was favorable, as opposed to handling more shipments. They did by design,” he said. LTL carriers “focused on cube, not tonnage.”

Optimism persists for 2019

Trucking companies that made double-digit revenue gains last year will find the feat hard to repeat in 2019, as the US economy is widely expected to slow. But the fastest-growing US motor carriers are still betting a combination of acquisitions, territorial expansion, and strong freight demand from their customers will help them raise their top lines even higher.

“If demand is strong, we’re going to have a good market, and a good year,” Don Daseke, founder, chairman and CEO of Daseke, said in an interview. “We don’t move consumer goods at all, only industrial products for companies like Boeing, Caterpillar, General Electric, and the Department of Defense. Their outlook is good, so the outlook is good for us.”

The next fastest-growing truckload carriers after Daseke — Penske Logistics and Knight Transportation — also increased revenue by acquiring other trucking companies.

Penske, which acquired Epes Transport Systems last June, increased revenue 31.9 percent in 2018 to $919 million, according to SJ Consulting Group. Knight Transportation acquired Abilene Motor Express and raised revenue 26.2 percent to $1.14 billion. J.B. Hunt Transport Services and Covenant Transportation Group also generated additional revenue through acquisitions.

Many of these purchases were about securing truck drivers, not shipper customers, lanes, or market share, said Jindel, whose company was a strategic adviser in Knight’s purchase of Abilene Motor Express. “Adding truck drivers was difficult,” he said. “To grow, you couldn’t just add drivers, you had to acquire them, and that meant acquiring companies.”

Economic indicators signal slower US economic growth in 2019, but it is growth nonetheless. Several measures of economic health are slipping from record-breaking high points. For example, the Industrial Production Index produced by the Federal Reserve Bank of St. Louis hit an all-time high of 110.1 points in December but dropped to 109.4 points in January.

That’s still 6 points higher than the index’s reading a year ago and 7.9 points above its most recent low point of 101.5 in March 2016, the nadir of what’s called an “industrial downturn.” The Institute of Supply Management (ISM) Purcahsing Managers' Index (PMI), which tracks manufacturing growth, rose 2.3 percentage points to 56.6 in January, and ISM cited “strong demand and output.”

US GDP expanded more rapidly than most economists expected in the fourth quarter, rising 2.6 percent, according to the initial estimate released Feb. 28 by the US Bureau of Economic Analysis. Most economists expected US GDP to rise between 1.8 and 2.2 percent.

US GDP would have been even higher if it weren’t for a surge in imports that swelled in advance of anticipated higher US tariffs on more than $200 billion in Chinese goods. Those tariffs, scheduled for Jan. 1, were delayed until March 2, and then delayed again to an unspecified date. Imports are good news for truckers but a drag on US GDP.

The GDP growth rate will be adjusted twice before a final figure is released, but the 2.6 percent gain is the best in recent years, topping a 2.3 percent GDP growth rate in the 2017 fourth quarter and a 1.8 percent expansion in the 2016 fourth quarter. Excluding the first quarter, GDP growth averaged 3.4 percent last year, compared with 2.7 percent in the same period in 2017.

Will 2019 resemble 2017 or 2016, when GDP growth between the second and fourth quarters averaged just 2 percent? The exceptional strength of the freight economy in 2018 makes it likely more carriers will see revenue gains slow or even drop year over year. In 2017, only nine LTL and truckload carriers in the Top 25 rankings expanded revenue 10 percent or more, compared with 26 last year. In 2016, 26 carriers saw revenue drop.

The long-term health of the US economy will determine whether carriers see smaller gains or larger pains ahead for the next nine months of 2019.

 

Top 25 truckload carriers
2018 REVENUE, INCLUDING FUEL SURCHARGES, in millions of dollars.
Rankcarrier name2017 Revenue2018 Revenue2017-2018 Percent ChangeNotes
1Swift Transportation$3,344.00$3,146.00-5.9%A subsidiary of Knight-Swift Transportation Holdings
2Schneider National$2,457.00$2,675.008.9%Went public in 2017, acquired Watkins & Shepard
3J.B. Hunt Transport Services$2,097.00$2,581.0023.1%Acquired Special Logistics Dedicated in July 2017
4Landstar System*$1,826.00$2,243.0022.9% 
5Prime**$1,638.00$1,937.0018.3% 
6Werner Enterprises$1,609.00$1,853.0015.2% 
7CRST International$1,448.00$1,583.009.3% 
8U.S. Xpress Enterprises$1,382.00$1,562.0013.0% 
9Daseke$703.00$1,345.0091.3%Acquired Leavitt's Freight Service, Builders Transportation Co., Kelsey Trail Trucking, Aveda Transportation, and Belmont Enterprises in 2018
10Crete Carrier Corp.$1,005.00$1,151.0014.5% 
11Knight Transportation$906.00$1,144.0026.2%Acquired Abilene Motor Express in March 2018; a subsidiary of Knight-Swift Transportation Holdings
12Ryder Systems$899.00$1,094.0021.7% 
13CR England$894.00$1,003.0012.2% 
14Penske Logistics$697.00$919.0031.9%Acquired Epes Transport Systems in June 2018
15Roadrunner Transportation$902.00$914.001.4%Restructured, regrouped truckload susidiaries in 2017
16Celadon Group**$856.00$762.00-11.0%Reduced truckload fleet size, reorganized operations in 2017
17Ruan Transportation Management Services $764.00$813.006.4% 
18Covenant Transportation Group$601.00$706.0017.3%Acquired Landair in July 2018
19Western Express$566.00$695.0022.8% 
20Anderson Trucking Service$605.00$674.0011.2% 
21Stevens Transport$607.00$667.009.9% 
22Cardinal Logistics$613.00$645.005.2% 
23Heartland Express$607.00$611.000.6% 
24Mercer Transportation*$493.00$603.0022.3% 
25Marten Transport$547.00$599.009.5%Driven by 34.1 percent revenue growth in Dedicated segment
TOTAL TOP 25 TRUCKLOAD CARRIERS $28,066.00$31,923.0013.7% 
*Light-asset carrier **Results adjusted to closer resemble calendar year
Revenue primarily for truckload operations and may include less than 10 percent for non-truckload services
Source: Company reports and SJ Consulting Group estimates
Prepared by SJ Consulting Group

 

Top 25 less-than-truckload carriers
2018 REVENUE, INCLUDING FUEL SURCHARGES, in millions of dollars.
Rankcarrier name2017 Revenue2018 Revenue2017-2018 Percent ChangeNotes
1FedEx Freight$6,343.00$7,352.0015.9%Driven by 16.9 percent growth in Priority service
2Old Dominion Freight Line$3,304.00$3,983.0020.6%Fastest-growing publicly traded LTL carrier in 2018
3XPO Logistics$3,641.00$3,830.005.2%Best full-year operating ratio in last 20 years
4YRC Freight$3,033.00$3,153.004.0% 
5Estes Express Lines$2,457.00$2,787.0013.4%Largest privately owned LTL carrier
6UPS Freight$2,598.00$2,706.004.2%Q4 growth negatively impacted by temporary stoppage of pickups during labor negotiations
7ABF Freight System$1,949.00$2,128.009.1%A subsidiary of ArcBest
8R+L Carriers$1,580.00$1,692.007.1% 
9Saia LTL Freight$1,405.00$1,654.0017.7%Opened 10 Northeast terminals since May 2017; plans for more in 2019
10Southeastern Freight Lines$1,116.00$1,237.0010.8% 
11Holland$1,132.00$1,178.004.0%A YRC Worldwide regional carrier
12Averitt Express$769.00$891.0015.9%Fastest-growing privately held LTL carrier
13Central Transport International $754.00$825.009.4% 
14Forward Air$656.00$748.0014.0%Expedited LTL revenue (includes Airport-to-Airport and Forward Air Complete)
15Dayton Freight Lines $571.00$659.0015.4% 
16Pitt Ohio Transportation Group$556.00$616.0010.7%Acquired Ross Express in July 2018
17AAA Cooper Transportation $554.00$606.009.5% 
18Roadrunner Freight$464.00$458.00-1.2% 
19Reddaway$412.00$424.003.0%A YRC Worldwide regional carrier
20A. Duie Pyle$310.00$351.0013.2% 
21New England Motor Freight$345.00$343.00-0.6%Filed for bankruptcy in February 2019
22New Penn $281.00$293.004.4%A YRC Worldwide regional carrier
23Daylight Transport$229.00$264.0015.3% 
24Central Freight Lines$263.00$248.00-5.7% 
25Oak Harbor Freight Lines$208.00$226.008.7% 
TOTAL TOP 25 LTL CARRIERS$34,928.00$38,650.0010.7% 
ALL OTHER CARRIERS$3,683.00$3,986.008.2% 
TOTAL LTL MARKET$38,611.00$42,636.0010.4% 
Note: Revenue for LTL operations only, unless otherwise indicated and includes Canadian operations
Source: Company reports and SJ Consulting Group estimates
Prepared by SJ Consulting Group, Inc.

Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @willbcassidy.

Comments

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