Tighter Brokerage Margins Crimp 3PL Profits
This story appears in the Feb. 13 print edition of Transport Topics.
Third-party logistics companies reported a flurry of quarterly earnings, many with lower profits compared with a year ago.
• Echo Global Logistics Inc. lost $3 million in the fourth quarter, or 10 cents per share, compared with year-ago earnings of $1.7 million, or 6 cents.
Industry analysts forecast $66,000 in earnings, or a penny per share, according to a Bloomberg News survey.
Revenue was relatively unchanged at $406.9 million, but the net after deducting brokered transportation costs dropped 11% to $71.1 million in the quarter.
Truckload volume rose 0.6%, and less-than-truckload increased 3.7% versus one year ago.
Echo generated 68% of its revenue from truckload brokerage, 27% from less-than-truckload and 5% from intermodal brokerage and other services.
The Chicago-based 3PL provider ranks No. 35 on the Transport Topics Top 50 list of the largest logistics companies in North America, based on net revenue after transportation costs were deducted.
• Radiant Logistics was the sole logistics provider to record higher results. It posted $2.6 million in net income, up from a $2 million net loss during the same period in 2015. Revenue was $198.9 million, but after transportation costs were deducted the net amount rose 5.3% to $50.1 million.
The company reports on a fiscal calendar that ends June 30.
Last month, Radiant expressed its intent to acquire Lomas Logistics, a Canadian 3PL that generated C$17.3 million in revenue in 2016. Radiant expects the deal to be approved by March 31.
The Bellevue, Washington company ranks No. 48 on the Transport Topics Logistics 50.
• Ryder System Inc. profits plummeted 37% to $48.2 million, or 92 cents, due to the weak used-truck market. That compared with year-ago results of $75.9 million, or $1.42.
The consensus forecast of industry analysts was for $1.36.
Ryder’s revenue improved 3.4% during the quarter to $1.7 billion, but the company lost $32 million in the used-truck market compared with a $17.7 million gain in 2015. The Fleet Management Solutions unit, which leases, maintains, rents and sells used trucks, generated $1.2 billion in revenue, virtually unchanged year-over-year.
Dedicated Transportation Services, which handles transportation management logistics, earned $256.9 million in revenue, up 11% year-over-year. The Supply Chain Solutions division, which offers supply chain consulting and other third-party logistics services, increased revenue 10% to $430.2 million.
Nevertheless, operating income (the amount after expenses are deducted from revenue) plunged 48% to $64.4 million at the Fleet Management Solutions division. Dedicated Transportation Services operating income rose 38% to $15.3 million, and Supply Chain Solutions improved 11% to $26.4 million.
Ryder CEO Robert Sanchez told investors that he expects further declines in used-truck sales and prices in 2017.
As a result, Ryder increased depreciation costs for used trucks and laid off about 250 employees in the fourth quarter.
“Although these actions negatively impacted the fourth-quarter results and resulted in earnings well below our forecast, we believe they are appropriate, given our outlook for the used-truck market is for challenges to persist through mid-2018,” Sanchez said.
Miami-based Ryder, No. 6 on the TT Logistics 50, also lowered first-quarter forecasts to between 82 and 92 cents, compared with $1.12 during the same period in 2016.
• C.H. Robinson Worldwide earnings declined 3.4% to $122.3 million, or 86 cents. In the prior year, the total was $126.6 million, or 88 cents.
The results beat the consensus forecast by 2 cents.
Revenue declined 1.6% to $561.5 million after transportation costs were deducted.
Truckload revenue, the company’s largest freight brokerage offering, dropped 12% to $296.7 million in revenue versus 2015. Less-than-truckload, the second-largest unit, improved 5.2% to $94.3 million.
Intermodal brokerage declined 15% to $7.5 million. Other smaller services, such as ocean, air and customs brokerage, improved by double digits.
The North American Surface Transportation unit, which brokers truckload, LTL and intermodal loads, reported a 14% drop in operating income to $157.6 million. The Global Forwarding division, which provides ocean freight, airfreight and customs brokerage, improved 32% to $24.6 million.
The Eden Prairie, Minnesota-based freight broker ranks No. 4 on TT Logistics 50.
• Hub Group Inc. profits dropped 18% to $18.2 million, or 55 cents. In the 2015 fourth quarter, the logistics company earned $22.4 million, or 63 cents.
Revenue jumped 9.9% to $978.6 million, but the net was a 3.2% increase to $120.5 million after the freight broker paid for trucking services.
Operating income at the Hub Group dropped 14% to $24.3 million, even though intermodal brokerage, truck brokerage and the Unyson Logistics unit combine for a 13% jump in revenue to $754.1 million.
The story was the same in the Hub Mode group, in which intermodal, truck brokerage and logistics revenues rose 6% to $256.4 million, but after expenses were deducted the operating income fell 6% to $6.5 million.
The Downers Grove, Illinois-based logistics company ranks No. 29 on the TT Logistics 50.
Hub Group came out 8 cents ahead of the consensus forecast.
