Of the publicly-traded carriers, Knight Transportation Inc. and Marten Transport Ltd. have been the only ones so far to see first-quarter earnings equal last year’s. Donald Broughton, an analyst with A.G. Edwards, told Fleet Owner he suspects they will be the only two that will see such fortune.
At this time last year, one of the biggest issues facing carriers was the cost to fuel their rigs. But with the struggling economy, has moved to the forefront of industry concerns. The trucks are on the road, but the loads are just not as plentiful.
“With all that's going on in the economy, you have to expect something like this,” said Deutsche Banc Alex Brown analyst John Barnes. “Now we are looking at how long it will take for the volumes to come back once the economy does pick up.”
For example, M.S. Carriers Inc. said operating income for the first quarter of 2001 was $6.7 million, a 31.8% decrease from $9.9 million in the same period 2000. However, diluted earnings per share were $0.09 cents, a decrease of 76.3% from $0.38 for the same quarter last year.
“Softness in the truckload freight markets lowered our operating margins primarily through a greater percentage of non-revenue miles,” said M.S. Carriers chairman and CEO Mike Starnes, who added that a slow January and February in particular cut into its earnings.
David R. Parker, CEO of Tennessee-based Covenant Transport Inc. also saw his company’s earnings slip because of the widespread economic slowdown. In Covenant’s case, the average miles per tractor decreased as well versus the same quarter last year. Parker said the three main factors were sluggish freight demand, higher fuel expense and increased insurance costs.
“Companies simply weren't shipping as much, and this hurt our profitability,” Parker said. “But over the last seven weeks we have seen positive utilization trends that give us hope that we have ‘hit the bottom.’”
Covenant saw its first-quarter 2001 revenue climb 4% to $131 million compared to the same period last year, but watched its earnings per share slip to $0.02 compared with $0.14 during the same quarter in 2000. The 2000 quarter, however, included a $0.03 per share gain on sale of equipment, the company noted. While larger carriers like Covenant are starting to see a light at the end of the tunnel, Broughton said that while some companies will rebound from the slowdown, others may never recover.
“I think it will be a matter of size as an indicator,” Broughton said. “Larger fleets can buy their equipment and fuel cheaper and compete for more lucrative contracts than the smaller fleets can.”