Trucking execs cautiously optimistic about 2024 peak season amidst freight economy uncertainty

The hour of truth is near.

Executives of several publicly traded trucking companies that recently reported earnings said they expect to know around Labor Day if the relatively normal seasonal upswing the industry has seen since spring will actually produce a peak season worthy of the moniker and—maybe, just maybe—herald the beginning of a legitimate upswing in the freight economy.

“If we do, in fact see the seasonal uptick as you get probably to the back half of August and really into September, then I think we would have more confidence that this is maybe a trend that we would expect to continue into fourth quarter and lead to a much more favorable bid season into next year,” Adam Miller, chief executive of Knight-Swift Transportation Holdings (No. 3 on the FleetOwner 500: For-Hire), told analysts on a July 24 conference call.

Miller was representative of how a number of his peers see the market, including in his timing estimate as well as in how he hedged about a true market turn.

Too many trucking leaders have predicted an imminent market turn since late last year for Miller or others to be truly bullish during the second-quarter earnings season. Yes, there’s a consensus that the worst has passed, but no executive is expecting a surge in business that will cure most of the industry’s ills. The adjectives they repeatedly used were more hesitant and hopeful than robust and ready to rock.

As Stifel analysts led by Bruce Chan wrote recently: “There are some glimmers of hope in the market but not enough to really inspire excitement just yet.”

Many industry players said in so many words they’re willing to forgo excitement if they can just get confirmation of some hopeful trends. But that’s not a given. Some data points are encouraging, with executives of Schneider National (FO500 No. 6) and Werner Enterprises (FO500 No. 11) among those saying many customers are asking about possible extra capacity this fall.

But other indicators—including July top-line volumes at some large carriers—still have work to do. A recent XPO (FO500 No. 13) study of that company’s large customers was exemplary of that dispersion.

“About half of them said they expect things to be flattish in the back half, and the other half was split equally between folks who expected some pickup versus folks who were expecting a bit of decline as well,” XPO CEO Mario Harik said August 2. “So, on a net-net basis; we are expecting a flattish-type demand environment in the back half.”

Beyond the still-careful outlook, a few other trends emerged from recent conference calls:

More productive pricing

Pricing trends appear to support the guarded optimism about a market ready to turn. At Schneider, President and CEO Mark Rourke said truckload contract prices rose in Q2 while spot prices actually topped contract rates in June—the first time that had happened in two years—and maintained a gap last month.

The XPO sales team, meanwhile, negotiated a collective 8% rate increase from a year ago, and ArcBest (FO500 No. 27) VP Chris Adkins was able to tell analysts the company finished Q2 with a 5.1% increase in rates, which was the fourth-highest increase in the last two decades.

Miller at Knight-Swift passed along an anecdote to warm the hearts of those chilled by this freight recession when he noted that some customers pushing for rate decreases near the end of bid season came up empty.

“We’ve held the line, and I think what we’ve found is we were still awarded a healthy amount of the business that we bid on—even at small increases when customers were looking for big decreases,” Miller said. “I think they’re understanding that the market's coming closer to balance and that they probably need to begin to secure quality capacity.”

Help wanted from the industrial economy

A pickup in activity from the factory sector would significantly improve the efficiency of many fleets. The exit of Yellow Corp. from the market a year ago brought into play thousands of shipments per day that are smaller than most other big-name carriers. On top of that, several executive teams have picked up more business from retailers, which also has lowered per-shipment weights.

Alas, an industrial acceleration doesn’t appear close: Recent Purchasing Managers Index readings haven’t been encouraging, and bellwether equipment and machinery makers such as Rockwell Automation Inc., Illinois Tool Works Inc., and Stanley Black & Decker Inc. have told investors they don’t expect customers to pick up their spending during the rest of 2024. Orders aren’t cratering by any means, but manufacturers are making their equipment and inventories last longer.

Fritz Holzgrefe, president and CEO of Saia (FO500 No. 19), summed it up efficiently: “I don't know that there's a catalyst today that says the industrial economy is coming back and that would change our mix of business.”

Yellow a year later

XPO and Saia have been among the big beneficiaries of Yellow’s demise in late July last year. They and others, including Knight-Swift and privately held Estes Express (FO500 No. 9), also snapped up terminals to go with the new business. But nearly every executive who addressed the post-Yellow landscape this earnings season pointed out that about half of Yellow’s former properties haven’t yet made it back to the market—and may not at all.

They said this will likely leave the LTL market short of capacity when overall volumes return in earnest. Because to be clear, it hasn’t yet.

“We lost a major player a year ago in the industry but it seems like we are back to square one in terms of volume,” Alain Bedard, president and CEO of TFI International (FO500 No. 7), told analysts late last month.

Still, the demand and price dynamics for LTL work remain far better than for truckload operators, and executives said they are teed up for nice price gains when the upturn truly arrives. One twist in the short term: Seth Runser, president of ArcBest’s ABF Freight division, said a clear view of the post-Yellow market may not arrive until late 2024 because last year’s shakeout of Yellow’s customers took until November to settle properly.

One hopeful note on which to end this mid-summer market assessment came from Derek Leathers, chairman and CEO of Werner. The carrier’s recent annual customer summit in Omaha had Leathers and his team walking away more confident about the intentions—and more aware of the nuances—of many of their biggest customers.

“Some of our data differs a little bit from some data that may be out there from a macro perspective,” Leathers said. “That differs from what you might see on a DAT load board, but it doesn’t mean that it’s not what’s happening every day in our network as we speak.”