Tighter Brokerage Margins Crimp 3PL Profits

Echo Global Logistics Inc. screen grab

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.