This Editorial appears in the April 26 print edition of Transport Topics. Click here to subscribe today.
The good news continued to pour in last week, as a string of trucking-related companies reported improving bottom-line results during the year’s first quarter.
Werner Enterprises, Knight Transportation, Ryder System and Landstar System all reported improved earnings and forecast better times ahead.
ACT Research Co. told us that orders for new Class 8 trucks rose 28% in March from year-ago levels, a stronger result than many analysts had expected, as the supply industry heads back toward normal activity levels.
Even the bad news had a silver lining. Avondale Partners reported that 730 fleets went out of business in the first quarter, well above the previous quarter and year-ago levels. But the company reported that the removal of more industry capacity was actually helping set up a time of strong earnings for the survivors.
The overall tone in the freight industry has turned just like the season, as executives quietly talk of sharply increasing business activity and escalating — if still generally unspoken in public — optimism for the results 2010 is likely to produce.
Perhaps it’s time to come out of the closet with our optimism.
The economy is picking up steam, freight demand is rising and the supply of trucks available to move the goods has sharply dwindled from the oversupply that was a hallmark of the past two years.
Spot market prices already are rising, even if rates in contracts that were signed during the depths of the recession are still relatively low and are a drag on profitability.
Bob Costello, chief economist of American Trucking Associations, noted that the sharp drop in capacity coincided with a historic drop in freight demand, so that rates continued to fall, even while trucks were withdrawn as fleets closed down.
Now, however, “When this is all settled, we could be looking at the industry’s tightest supply situation ever,” he said.
And that situation could be a great tonic to fleet revenues as the economy expands. Costello also predicted that ATA’s truck tonnage index will show solid growth when he reports the March data later this week.
Meanwhile, Kevin Knight, CEO of Knight Transportation, in reviewing his fleet’s performance, said, “We appear to be firmly in a recovering truckload freight market.”
He added that business “grew increasingly positive during the first quarter.”
Let’s see what the second quarter of 2010 brings to trucking.
