The initial batch of first quarter earnings reports indicate that many trucking providers are finally returning to profitability after a long, hard slog through 27 months of global economic recession that saw freight volumes nosedive.
J. B. Hunt Transport Services, for example, said an across-the-board rebound in business helped it achieve net earnings of $37.5 million on total operating revenues of $845 million in the first quarter this year, compared to earnings of $30.8 million on $723 million in total operating revenues in the same period last year.
The carrier said that 17% increase in first quarter total operating revenues resulted from increased freight demand across its service offerings, better intermodal segment volumes, significant growth in dedicated contract services (DCS), higher volumes in its integrated capacity solutions segment, plus revenue growth from its long-haul trucking segment.
"The freight recession we have experienced for over three years, showed signs of yielding to moderate volume improvements throughout the current quarter,” said Kirk Thompson, J.B. Hunt’s president and CEO, in the company’s first quarter earnings statement. “While the pace of the broader macro economic recovery may be debatable, our current quarter results reflect a positive trend in the freight economy.”
Hunt’s operating income in the first quarter jumped to $67.4 million vs. $57 million in the same period last year due to a 21% increase in intermodal volumes, positive long-haul truck freight operating income vs. a $5.8 million loss last year, and improved DCS operating results. Operating income and net earnings grew despite significantly lower base freight rates, Thompson stressed.
He added that J.B. Hunt believes the demand increase it is experiencing is partly attributable to increases in customers' supply chain activities and partly due to a continued shrinkage of viable capacity. “Spot market rates increased in the current quarter, another sign of improving transportation economics, which has historically led to improved contract rates,” Thompson said.
"The freight environment continues to improve,” noted Henry Gerkens, chairman, president and CEO of Landstar System, Inc., in the carrier’s first quarter earnings report. “Recent trends in March, and thus far in April, indicate that both the revenue per load and the number of loads hauled remain strong compared to the corresponding prior year periods. I expect these trends to continue throughout the 2010 second quarter.”
Landstar said its revenue increased 17% to $548.1 million in the first quarter this year, up from $469.2 million in the same quarter during 2009. Net income also popped up in the first quarter, to $17.2 million compared to $13.9 million in the same period last year.
“This marked the first time since the third quarter of 2008 where revenue in the current quarter increased over the corresponding quarter in the prior year,” Gerkins said. “That … was primarily the result of an 18% increase in the number of loads hauled, which was partly offset by lower revenue per load of approximately 2%, compared to the first quarter of 2009.”
“We expected the first quarter to be the most challenging of 2010 as the economic recovery gathered steam through the year,” said Kurt Kuehn, chief financial officer for United Parcel Service. “As it turned out, revenue was stronger than we expected due to international volume gains, increased yields in the U.S. and growth in [freight] forwarding and logistics [operations]. Also, the operating leverage in our streamlined network provided higher margins than anticipated.”
Kuehn said things are so much better that UPS boosted its earnings per share by 37% for the first quarter of 2010 – to $0.71 per diluted share compared to $0.52 per share in the same period in 2009. That’s because UPS’s consolidated revenue for the first quarter grew 7%, driven by increases of 18% in its international package and 14% in supply chain and freight divisions.
UPS’s international daily volumes grew significantly with export up more than 9% and non-U.S. domestic up over 24%. While U.S. domestic daily volume increased less than 1%, it was the first year-over-year growth in domestic volumes in more than two years, Kuehn pointed out.
This more “positive” outlook on the freight markets and overall direction of the U.S. economy seems to be taking hold in transportation in general. According to an opinion survey of transportation experts recently conducted at the 32nd Annual TIA Convention and Trade Show in Tucson, AZ, by Transite Technology, 80% of respondents stated that their businesses were faring “better or much better” compared to a year ago.
Transite also reported that 60% of the survey takers – which included shippers, carriers, and third party logistics (3PL) firms – anticipate that their company will add employees this year, with almost 90% feeling that their company will perform “better or much better” through the remainder of 2010.
“This survey, along with anecdotal conversations with shippers and carriers, indicate the transportation industry is bouncing back strongly and is in a current state of growth,” said Geoff Comrie, CEO of Transite. “I think it’s fair to say that the rebound begins with the shipper community as the more they ship, the better the business is for the carrier and 3PL community. These results are certainly encouraging for everyone involved in the business.”