Publicly-traded TL carriers tread water in Q1

Freight demand was strong at the start of the year and a late in the quarter fuel price spike is likely to have more of an impact in the second quarter financial statements than in Q1. In general, the carriers showed reasonably strong year-over-year improvement yet a mixed bag when compared to the prior quarter.

Most of the major metrics in our review of the public TL fleets point to ‘more of the same’ in Q1. Compared to last year the main items of improvement in Q1 were Net Income, Freight Revenue, and Fuel Costs. Degradation was noticeable in Revenue per Loaded Mile (rates). Most items showed relatively little change in the pace of activity. We expect to see revenue and costs begin to really move higher once we hit Q2.

Revenues
Freight Revenues moved modestly lower in Q1, but since this typically falls from Q4 to Q1 the year-0ver-year growth accelerated for the second straight quarter, hitting 9.3% in Q1. Fuel Surcharge Revenues have been essentially flat for the last 4 quarters and the year-over-year growth rate is edging down, now near 20% after hitting 60% in 2011Q2. This will likely tick up in Q2 before moderating, or even falling, during the latter half of the year.

Net Income
Net Income dropped in Q1, but less so than during Q1 of last year, so the year-over-year growth rate improved for the second straight quarter – rising 45.9% in Q1. Income was very volatile last year, and that may continue this year if fuel prices don’t stop bouncing around.

Carrier Rates
Carriers’ rates (as measured by revenue per loaded mile) had the largest quarter-over-quarter drop since the early part of 2009, down 2.1%, and the year-over-year rate fell below 4% for the first time since 2010Q2, up only 3.7%.

Costs Analysis
Costs fell on a quarter-over-quarter basis for the first time in eight quarters. This led the year-0ver-year growth to drop to 10%, the third consecutive slowdown. Costs have been essentially unchanged for the last four quarters – a remarkable level of stability for the typically volatile truck markets. For the fourth straight quarter Total Operating Costs remained near their fuel crisis highs from mid-2008. This is not being driven by fuel cost increases, as they are well below their 2008 levels, but rather a shift to using purchased transportation (i.e. owner-operators or brokered freight).

Wages dropped slightly in Q1, but the year-over-year growth rate increased to 6.7%. Wages tend to jump significantly during Q2 as fleets ramp up for the spring freight season. Look for that trend to continue in 2012.

Fuel Costs edged higher in Q1 after falling for the last two quarters, up 2.9%. The year-over-year gain also slowed once more, up just 7.0%. That is the slowest growth rate of this recovery. In Q2 we will be overlapping high numbers from 2011, but also will have increased fuel expenses from the rise in fuel from February to May. Fuel costs are still 25% below their peak level from 2008 – so the cost pressures are not being solely brought about by high fuel prices.

In 2008, fuel costs jumped up to be nearly 30% of total operating costs. From the end of 2009 through 2010 fuel costs remained just under 20% of operating costs. In 2011, that percentage rose to 20% and has stuck there. It is still well below the very large levels that we saw during 2008. Fuel costs remain in a normal range right now. It should be noted that as the independent contractor fleet increases, a small portion of the fuel costs will show up in Purchased Transportation costs instead of in fuel.

Purchased Transportation fell modestly in Q1 as it typically does; however, it continues to show strong year-over-year growth, staying near the 20% pace, at 19.1% in Q1. This highlights the impact that the independent contractor continues to have in the marketplace. Many fleets have yet to add to their company driver fleet but increased their base of independent contractors. The fleets in our database saw their company-owned tractor counts top out at the end of 2006 and then steadily moved lower until hitting a trough at the start of 2011. They were essentially flat for all of 2011, yet they fell again in Q1 and have hit a new low in our database. Meanwhile, the owner-operator portion for those same fleets dropped significantly during 2008, but rebounded quickly during 2009 back to nearly the same level. It has been nearly flat since late 2009, but, after moving modestly lower during 2011, it rose 3.9% versus last year in Q1.

NOTE: This database tracks reports produced from some of the major publicly-traded TL carriers. Represented in this database are: Celadon, Covenant, JB Hunt, Knight, Marten, P.A.M., USA Truck, Werner.