Copyright 2004, Traffic World, Inc.
The earlier trucking companies report their quarterly earnings the better, trucking analyst Donald Broughton figures. After all, he says, nobody ever restated quarterly earnings to add profits.
"Earnings releases are not like fine wine - they don''t get better with age," Broughton said. "When they hold results, it is never because they''re going to report a big gain. It''s always negative."
So it figured that when truckload innovators Werner Enterprises (the nation''s fifth-largest truckload carrier), Heartland Express and Knight Transportation were first with their fourth-quarter and full-year 2003 earnings, they would have good news. But few counted on it being such good news for the carriers.
All reported double-digit full-year earnings improvements. That''s another sign of the tightening capacity in the truckload sector. Whether that can hold amid the hours-of-service changes this year is another story - but for now, there''s no curbing the enthusiasm.
"These companies rocked! They''re making money," says Broughton, trucking analyst for A.G. Edwards & Sons, St. Louis. "Werner reported a 5.8 percent increase in rates per loaded mile year over year. Three percent is pretty good for a trucker - 5.8 percent is hold-the-presses news for a trucker."
Broughton says overall, "it''s the economy, stupid" that''s helping truckers. "But it''s a reflection of execution. Knight, Werner and Heartland are the best in execution."
Here''s a company-by-company breakdown of these three truckload leaders:
Werner Enterprises, Omaha, Neb., reported its ninth straight quarter of year-over-year higher operating revenue and earnings in quarter ended Dec. 31, 2003. Operating revenue increased 8 percent to $380.2 million compared with $352.4 million in the same period of 2002. Net income grew 22 percent to $21.5 million.
For the year, operating revenue of $1.458 billion in 2003 was 9 percent higher than the $1.341 billion in 2002. Net income increased 20 percent to $73.7 million in 2003, compared with $61.6 million in 2002.
"During fourth quarter, demand for our services was stronger than fourth quarter a year ago," said Chairman and CEO Clarence "C.L." Werner said. "Freight demand from several of our retail and consumer products customers improved compared to the same period a year ago. In addition, freight demand for the first three weeks of January 2004 has been stronger than the weaker demand of the same period a year ago.
"I anticipate we will continue to see tightened truckload capacity in 2004 due to a more challenging driver market and the impact of the new hours-of-service rules," Werner added. "We are continuing to execute our plan of limited fleet growth and remain focused on improving our operating margin."
Last month Werner raised its accessorial charges to customers for multiple stop shipments and its rates for equipment detention. Werner also raised its driver stop pay and is implementing pay changes to drivers for delay time due to equipment detention.
Truckload carriers are reporting average fuel prices in the fourth quarter of 2003 that were 5 cents a gallon higher than in the fourth quarter of 2002.
Werner''s fuel surcharge revenue was $14.5 million in the fourth quarter of 2003 compared with $12.1 million in the same period of 2002.
Fuel expenses, net of fuel surcharge revenue, had no impact on earnings per share in the last quarter compared with fourth quarter 2002. Fuel surcharges totaled $61.4 million in 2003 compared with $29.1 million in 2002.
Werner increased its dedicated fleet from about one-quarter of its total truck fleet in fourth quarter 2002 to about one-third of its total truck fleet in fourth quarter 2003. Dedicated fleet business tends to have lower mileage per trip, a higher empty mile percentage, a higher rate per loaded mile and lower miles per truck per month.
Werner''s financial position remains strong. Werner Enterprises became debt-free in December as its only remaining debt of $20 million was repaid.
Werner has no truck or trailer operating leases and has no off-balance-sheet debt. Due to the debt repayment, annual truck licensing, and stock repurchases, the company''s cash position declined from $125.8 million on Sept. 30, 2003 to $101.4 million on Dec. 31, 2003. Cash flow from operations of $207.5 million in 2003 was lower than the $226.3 million reported in 2002 due to lower truck purchases in 2003.
Werner said its goal is to improve its annual operating margin to 10 percent or better before increasing its fleet growth rate.
Scott Flower, Smith Barney trucking analyst, noted Werner''s earnings were in line with expectations but revenue was slightly higher than expected. Werner''s revenue per total mile (excepting fuel surcharges) rose 3.9 percent year over year. While increased dedicated business helps, Flower noted that Werner has been "very disciplined" on price.
Werner ran 11.1 percent deadhead miles in the fourth quarter and its average mile per truck fell 1.1 percent year over year. With freight demand robust, the steeper than expected decline was somewhat surprising to Flower.
"While increased dedicated business likely was a factor, we believe Werner has remained selective in choosing freight with adequate margins," Flower noted. Werner''s operating ratio improved 110 basis points to 91, which was about what analysts expected.
Heartland Express, Coralville, Iowa, said its fourth quarter revenue increased 12 percent to $103 million from $92 million in the fourth quarter of 2002. Net income was $19 million and results reflect an adjustment pertaining to self insurance accruals. The impact of the reserve adjustment was an increase in net income of $5.4 million. Heartland posted an operating ratio of 72.1, or 80.1 with the reserve adjustment.
For all last year, Heartland said revenue increased 18.9 percent to $405.1 million from $340.7 million for 2002. Net income last year was $57.2 million, up from $42.8 million in 2002. Like Werner, Heartland''s balance sheet continues to be debt-free.
Bear Stearns trucking analyst Ed Wolfe noted Heartland''s operating income was up nearly 26 percent year over year. Heartland''s improvement in OR resulted from significantly lower rent and purchased transportation costs as its owner-operator count has fallen significantly over the past few quarters, Wolfe said.
"While Heartland''s 80.1 OR was impressive, we don''t believe it is sustainable in the near-term as costs for Heartland seem likely to rise from increasing driver pay by three cents a mile in the first quarter," Wolfe said.
He said that higher insurance and fuel costs also would add to costs.
Knight Transportation, Phoenix, said its quarterly net rose 22 percent to $10 million on a 14 percent rise in revenue to $87.1 million, compared with year-ago quarterly earnings of $8.2 million on $76.4 million revenue for the same quarter of 2002.
It was another record quarter for Knight''s revenue and earnings. Knight has posted seven straight quarters of increases in revenue per mile.
For 2003, revenue, before fuel surcharges, increased 17 percent to $326.9 million from $279.4 million for 2002. Knight''s full-year net income increased 27.2 percent to $35.5 million from $27.9 million for 2002.
"Freight demand remained solid through the end of the year and we perceived little evidence of growth in industry-wide tractor-trailer capacity," Knight Chairman and CEO Kevin P. Knight said.
"We were especially pleased to grow our tractor fleet internally by 13 percent versus the same quarter last year and also raise our revenue per tractor," Knight added. "We believe our strategy of opening new operations centers in targeted cities continues to pay off."
Knight used higher revenue per tractor and strict cost controls to achieve an operating ratio of 80.7 percent for the quarter. That''s an improvement of 60 basis points compared with the same quarter of last year despite higher fuel prices, a driver pay increase in September and slightly lower miles per truck.
Knight said it is "well positioned for further profitable growth," noting freight demand has been seasonally stronger in January than in several years. Knight is opening its 15th operations center this month in Las Vegas. It hopes to add two more operations centers while adding 350-400 tractors system-wide this year.
''These companies rocked!''
''These companies rocked!''
Copyright 2004, Traffic World, Inc.