Rail service problems are starting to hurt truckers with intermodal operations, especially those such as Marten Transport that move refrigerated goods, a transportation analyst says.
BB&T Capital Markets lowered its projected third quarter and 2015 and 2016 earnings estimates for Marten, citing rail service issues that could impede intermodal growth.
The Mondovi, Wisconsin-based trucking company is doing fine on the road, BB&T analyst Thomas A. Albrecht said in a Sept. 16 note to investors, but rail service is a problem.
“While rail service problems are ‘temporary,’ they are likely to linger longer than the Street has been willing to concede,” perhaps until the fall of 2015 or into 2016, Albrecht said.
Railroads came under fire for service issues affecting grain exports and the demise of the Cold Train refrigerated intermodal service in a U.S. Senate hearing last week.
Marten’s intermodal loads will be up 13 percent year-over-year in the third quarter, but down 7 to 8 percent from the second quarter, Albrecht said. “Marten’s loads normally grow sequentially so the results are clearly impacted by the rail service issues,” he said.
Incremental costs associated with slower train speeds and longer dwell times are more pronounced for refrigerated intermodal than for dry, the BB&T analyst said.
“First, a reefer trailer costs nearly $60,000 versus $15,000 for a container,” he said. “Second, extra dwell time means more fuel burn” and more fuel purchased at higher costs.
As the rails slow, Marten is making gains on the highway, Albrecht said, increasing its dedicated business and its number of “seated” trucks while raising over-the-road rates.
In the second quarter, Marten increased its weekly average revenue per tractor 4.1 percent and raised revenue per loaded mile by 2.6 percent — its best increase since early 2012.
“Marten is doing a lot of things right for the long-term,” Albrecht said, including raising pay for driver detention — a major source of driver dissatisfaction — to $20 an hour after one hour.