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April 17, 2017 2:15 AM, EDT
Weaker 1Q Results Expected From Truckload Carriers
Russ McNeil

This story appears in the April 17 print edition of Transport Topics.

Transportation and logistics companies begin announcing first- quarter results this week, as analysts predict truckload profits will be lower than 2016 and less-than-truckload and third-party logistics companies will have mixed results.

Earnings season started on a sour note when Hub Group Inc. and Knight Transportation Inc. warned that they were lowering previous forecasts for the first quarter.

Hub downgraded its estimated earnings per share range to 30 cents to 32 cents. The forecast had been 45 cents to 48 cents, according to a Bloomberg News survey of analysts. The company said excess truck capacity dragged down intermodal prices in the quarter. Hub ranks No. 28 on the Transport Topics Top 50 list of the largest logistics companies in North America and No. 2 on the intermodal-drayage sector list.

“We believe the current intermodal pricing environment is an aberration that will improve as truck capacity becomes tighter and pricing becomes more rational. Intermodal will always be a major part of Hub’s business. But through diversification, the inevitable cyclical rise and fall of intermodal prices will have less of an impact on earnings,” said Hub’s chairman and CEO, David Yeager.

KeyBanc Capital Markets Inc. analyst Todd Fowler said he believes that Hub’s margins were probably less than 12% in the quarter, compared with 13.8% one year ago. Several logistics companies told Transport Topics at the Transportation Intermediaries Association Capital Ideas Conference & Exhibition that margins were tighter this quarter.

Knight Transportation Inc., which ranks No. 29 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, lowered its earnings forecast to 16 cents to 18 cents compared with the previous 24 cents to 27 cents. Knight revealed that revenue per loaded mile decreased 2.4%, steeper than the company predicted. Miles per tractor fell 1% year-over-year.

“Although we are disappointed in our first-quarter results, we are encouraged by the strength we experienced in March. Our leadership has enhanced our focus on cost-control measures and we expect meaningful improvements in our results in the coming quarters,” Knight CEO Dave Jackson said.

In total, 11 truckload carriers could announce lower profits in the quarter, according to the analysts. Only two — Landstar System and TFI International Inc. — are expected to see higher profits. Two others — Celadon Group Inc. and USA Truck — are expected to lose money. Landstar, TFI, Celadon and USA Truck rank Nos. 9, 10, 32 and 53, respectively, on the for-hire TT100.

J.B. Hunt Transportation Services Inc., No. 4 on the for-hire TT100, kicks off earnings season on April 17. Werner Enterprises, No. 15 on the list, follows on April 20.

“We expect weaker earnings results from our truckload universe this quarter,” Stephens Inc. analyst Brad Delco wrote in an investors note. “We believe the freight environment was generally soft [albeit choppy] throughout the first quarter. Following a relatively solid start in January, we believe trends weakened in February as a result of mild weather and excess capacity, before the market improved in March heading into the spring peak.” Industry analysts point out that shippers held firm in contract negotiations this year. As a result, rates were flat to 2% higher than 2016.

Robert W. Baird & Co. analyst Benjamin Hartford said that when prices are combined with lower used-truck prices, higher driver- recruitment costs and costlier insurance, carriers will “tamp down both [first-quarter] results and the tenor regarding outlooks for the balance of 2017.”

Among less-than-truckload carriers, YRC Worldwide Inc. and ArcBest Corp. are expected to lose money. But analysts believe profits will jump nearly 10% at Old Dominion Freight Line Inc. and remain close to flat at Saia Inc., according to Bloomberg News. YRC, Old Dominion, ArcBest and Saia rank Nos. 5, 11, 12, and 25, respectively, on the for-hire TT100.

Billy Hupp, chief operating officer at Estes Express Lines, characterized the quarter as “good” in a March 21 conversation with TT. The privately owned LTL ranks No. 14.

“We’re certainly ahead of last year at this point and that’s a good sign. Now if the spring will kick in the way it usually does, then we’ll be off to the races for a good year,” Hupp said.

Delco characterized the LTL business environment as “generally stable” throughout the quarter.

For third-party logistics companies, analysts believe C.H. Robinson Worldwide Inc. and Ryder System Inc. will report lower profits year-over-year. Echo Global Logistics Inc. will remain close to flat with less than $1 million in profits for the quarter. However, XPO Logistics Inc., Expeditors International of Washington Inc. and Radiant Logistics Inc. are expected to exceed results from a year ago.

XPO, C.H. Robinson, Expeditors, Ryder and Echo rank Nos. 1, 5, 6, 7, 39, respectively, on the Transport Topics Top 50 of the largest logistics companies in North America. Radiant Logistics isn’t on the list but ranks No. 36 on the freight brokerage sector list.