A review of publicly owned trucking company earnings in the second quarter shows the strength of freight demand building up as the U.S. economy expanded, supporting growing expectations of a busier than typical peak shipping season in North America this fall.
The 21 public motor carriers tracked by JOC.com increased revenue 12.2 percent year-over-year in the second quarter to a combined $10.7 billion. Truckload carriers increased revenue 16.7 percent overall to $5.7 billion, while the less-than-truckload group increased revenue 9.2 percent to $6.3 billion, an analysis of data collected by JOC.com shows.
In the first quarter, the group of 21 carriers increased total revenue 9.2 percent to $9.5 billion, despite extreme weather that roiled truck networks and supply chains. Truckload carriers increased revenue 13.5 percent in the first quarter, and LTL group revenue rose 6.2 percent.
To better understand the difference in the pace of the U.S. economic recovery this year, look back to the second quarter of 2013, when the economy was expanding much more slowly. In that quarter, combined revenue for the total public trucking group rose 2.5 percent, with truckload revenue climbing 2.2 percent and LTL revenue rising 2.7 percent.
The 9.7 percentage point difference in year-over-year revenue growth rates is a reflection of the much faster pace of overall economic growth in the second quarter this year. In the second quarter of 2013, U.S. gross domestic product increased 2.5 percent. In the second quarter of this year, the U.S. economy expanded 4.2 percent, according to the U.S. Bureau of Economic Statistics’ second estimate, released by the Commerce Department Aug. 28.
The 12.2 percent increase in trucking revenue was the strongest showing for the publicly owned companies since the first quarter of 2012, when the group’s sales grew 9.3 percent. Between the second quarter of 2012 and the fourth quarter of 2013, the rate of increase fluctuated between a low of 0.8 percent in the fourth quarter of 2013 and a high of 4.4 percent in the third quarter of 2013. The carriers averaged 3.2 percent growth over seven quarters.
Higher rates and higher demand for truck capacity, both in the troubled first quarter and more frenetic second quarter, sparked the sharp increases in revenue this year. The increase was fueled by shippers’ need for emergency help unraveling snarled supply chains in the first three months of the year, followed by a second quarter of pent-up demand, early orders for imports and greater industrial output and housing sales. Containerized imports were up 6.6 percent in the second quarter, according to PIERS, the data division of JOC Group. That helped keep inbound containers and truck trailers full well into the summer months.
Nine of the 21 public carriers reported double-digit revenue gains. On the truckload side, acquisitions boosted Heartland Express revenue 69.3 percent to $226.8 million in the quarter. Roadrunner Transportation System increased truckload revenue 43.1 percent from a year ago thanks to several acquisitions in 2013 and 2014. Celadon Trucking increased revenue 21.4 percent; Landstar System, 20.8 percent; and Universal Truckload Services, 16.4 percent. Among the LTL carriers, Old Dominion Freight Line increased revenue 19.1 percent; Saia, 12.9 percent; FedEx Freight, 11.8 percent; and ABF Freight System, 10.3 percent.
Despite rising operating costs — especially the cost of hiring truck drivers and purchasing truck equipment — 14 of 20 carriers improved profitability. Five out of nine LTL carriers improved profitability, three saw profits slip. One, YRC Freight, reported a loss, but significantly narrowed that loss compared with its results in the second quarter of 2013.
Nine out of 12 truckload carriers improved profitability, and none reported a loss in the second quarter. ABF Freight saw the biggest increase in profitability on the LTL side, 314.5 percent, while J.B. Hunt Transport’s truckload division increased its profit 217 percent.
Both LTL and truckload groups were able to push down their average operating ratios — a measure of profitability before taxes, interest and other charges. The LTL average dropped to 93 from 93.7 in the 2013 second quarter and 97.3 in the first quarter of 2014. The truckload average operating ratio dropped to 89.8 from 91 a year ago and 94.5 in the first quarter.
Although a few of the individual carriers still have significant problems to work out, as a group the publicly traded trucking companies head into the fall peak season healthier than they’ve been in years, and in a better position to translate higher rates into better returns.