Carriers’ margins will continue to grow despite headwinds
November 11, 2011
Barring a collapse in the economy, margins will continue to grow at a solid pace for the next few years. However, while still improving the rate of growth will continue to decelerate. Also, the implementation of the HOS regulations will be a double-edged sword, as it would help rates by significantly tightening the capacity market but will also drive the need for significant expansion in costly recruiting and retention efforts.
Either way, we look for margins, as a ratio of total costs, to be above its 10-year average for the next few years. They are likely to exceed the levels seen during the last uptick back in 2004-2006. During that time the margin ratio averaged 6.5%. We are anticipating an average of 7.0% from 2011-2013.
The surge in margins during 2010 helped to fuel the early 2011 spurt in tractor orders. If regulatory delays put enforcement of HOS into 2013, then that will move the capacity crunch out of 2012. Rate increases would likely take a hit, but the impact on margins may be muted because of the dual impact stated above.
Truckers’ margins fell significantly for 3 straight years before surging during 2010, nearly doubling in one year. The weaker economy and early surge in fuel costs have limited the growth in margin expansion during 2011.
Margins are expected to grow more than 30% in 2011, still a strong rate of growth but well below the 80% gain seen in 2010. We then expect margin growth to decelerate into 2013 as the continued economic recovery drives labor, equipment, and overhead costs higher. We look for margin expansion to be near 25% in 2012 and then getting down near 15% in 2013.
Our truckload costs data is based on factoring the per-loaded-mile impact of basic cost inputs: Equipment, Labor, Overhead, Fuel, Margins. We use publically-available data from security analysts and trade organizations and forecast the cost and margin elements, factoring in inflation and industry conditions.
Click the link below to print a print-friendly page of the this analysis.Print Page
Use our chart creator to generate charts using the data that was used in this analysis.TruckGauge Chart Creator
This functionality is only available to Premium Members. Please upgrade your account to gain access to the data used in this analysis.Upgrade to a Premium Member