Trucking Economics: Back To The Basics
As trucking capacity has shrunk, good management and the law of supply and demand spell a return to profits.
DOUG CONDRA
PRESIDENT/PUBLISHER
A glance at several third-quarter fleet financial reports might cause one to think the industry has indeed bottomed out of this recession. Some of them are stunning--
Marten Transport: record third-quarter revenues, net income up 14.9% from 2001 third quarter.
Heartland Express: revenues up 23.3%, net income up 20.2%.
Werner Enterprises: revenues up 4%, net income up 35%.
J.B. Hunt: revenues of $583 million, up from $537 million; net earnings $16.8 million, up from $4.5 million.
Knight Transportation: revenues up 14.1%, net income up 18.7%. Landstar System: revenues of $299 million, up from $276 million; record net income of $13.9 million, up from $11.9 million.
USA Truck: revenues up 12.4%, net income up 115.7%.
And lest you think it was just truckload carriers--
Arkansas Best revenues were $336 million, up from $330 million; net income hit $18.3 million, up from $13 million.
Old Dominion Freight Line: revenues up 16.3% to record $150 million; net income up 74.7%.
Roadway Corp. was an exception. Its combined revenue was up 14.2% from a year ago, while net slipped to about $7 million, from $8.2 million. But the company says it's rapidly picking up former Consolidated Freightways customers, and projects 25-30% fourth-quarter revenue growth.
So what happened to all the gloom and doom? There's still some of it around; not everyone is feasting on freight left by the likes of CF, Burlington Motor Carriers and others who have left the building.
But as trucking capacity has dwindled, the survivors are succeeding with old-fashioned basic blocking and tackling. They're starting to be able to charge enough to actually make a profit.
Virtually every one of the carriers mentioned here registered an improved operating ratio (the number of pennies left over from dollar of income, once your expenses are paid) in the third quarter.
It's almost hard to believe, after what we've been through.
C.L. Werner, CEO of the company that bears his name, says truck capacity "is being constrained due to limited fleet growthŠtrucking company failuresŠand minimal industry-wide truck additions."
USA Truck CEO Robert Powell says the decline in capacity "allowed us to increase our rates slightly and reduce our empty mile factor below 9% for the first time since the fourth quarter of 1999."
And Roadway CEO Michael Wickham: "Now our job is to manage rapid growth in business volumes while continuing to control costs and not add unnecessary capacity."
It's looking like trucking is on its way to getting the market-share monkey off its back. This is a supply-and-demand business, and the suppliers of freight transportation are coming into demand again.
That indicates a return to carrier profits—the basis for an entire industry's health. And they're long overdue.
