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April 28, 2014 2:15 AM, EDT

Truckload Carriers Report Mixed 1Q, But Expect Improvements for Rest of Year

By Rip Watson, Senior Reporter

This story appears in the April 28 print edition of Transport Topics.

Comments with first-quarter earnings reports issued last week continued to trigger optimism about a pickup in freight in 2014, though severe winter weather dampened results for several prominent truckload fleets.

Truckload carrier Knight Transportation said profits rose 26%, and Landstar System boosted net income 7.4%, capitalizing on higher rates tied to capacity reductions related to weather disruptions. P.A.M. Transportation Services Inc. also posted a first-quarter net income, reversing a year-ago loss.

However, earnings fell at Werner Enterprises by 18%, Heartland Express by 29% and Forward Air by 7%.

Outside the truckload sector, Old Dominion Freight Line, the first less-than-truckload fleet to report, said net income rose 13%. Truck leasing specialist Ryder System Inc. boosted earnings 20% as the rental and leasing market strengthened.

“The overall trucking environment was strong in the first quarter,” said Kevin Knight, CEO of Knight, whose observation others echoed. “We expect to see increased demand for our services in the coming quarters.”

Knight, based in Phoenix, ranks No. 31 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers.

Despite lower earnings, Werner outlined “meaningful improvement in our freight demand, which we believe is a longer-term shift in market dynamics.”

Demand for one-way trucks was the highest in a decade during the quarter, Werner reported, amid tighter capacity, market improvement that began in December and an “extremely challenging” driver market made worse by federal regulations.

Werner, based in Omaha, Neb., ranks No. 13 on the for-hire TT100.

Another CEO whose company was battered by weather also expressed optimism.

“With winter now behind us, we feel very positive about how we have positioned each of our operating segments for the balance of the year,” said Bruce Campbell, CEO of Forward Air Corp., which ranks No. 45.

At No. 65, P.A.M., based in Tontitown, Ark., CEO Daniel Cushman said, “Industry capacity continues to tighten, which was primarily weather-related in January and February. We haven’t seen any indication that this tightening will be short-lived.”

P.A.M.’s net income was $1.36 million, or 17 cents per share, helped by lower fuel costs and higher sale gains. That is a rebound from the loss of $456,267, or 5 cents a share, a year ago. Revenue fell 2% to $97.8 million.

Among the gainers, Knight raised net income to $19.1 million, or 23 cents per share. Revenue rose 5.8% to $249.2 million. Knight said more profitable brokerage and a stronger used-truck market aided earnings.

Thom Albrecht, an analyst from BB&T Capital Markets, said Knight boosted rates per loaded mile by 4.9% as the carrier took advantage of tight capacity to win higher rates as shippers scoured their routing guides for available carriers.

Landstar System, No. 9 and based in Jacksonville, Fla., said net income was $27.6 million, or 61 cents per share. An increase in rates for truck shipments topped 8%, driving a revenue increase to $688.2 million.

Werner’s net income slipped to $14.3 million, or 20 cents per share, hurt by a $5.3 million rise in costs and little-changed revenue of $492.0 million. Profit before interest and taxes fell by about half at Werner’s non-asset-based service.

Earnings declined to $14.1 million, or 16 cents per share at No. 47, Heartland Express, based in North Liberty, Iowa, as costs rose, gains on equipment sales were lower and severe winter weather hurt results.

Revenue increased nearly 70% to $224.5 million from $134.2 million, reflecting the effects of last year’s acquisition of Gordon Trucking Inc., of Pacific, Wash., during the fourth quarter.

Forward Air posted $10.2 million, or 33 cents per share, in net income. Revenue increased 21% to $171.6 million, partly related to an acquisition. Weather lowered earnings per share by at least 4 cents per share.

Old Dominion, No. 11, also cited the improving freight market as a driving force in its net income of $45.9 million, or 53 cents per share. The carrier’s revenue climbed 15% to $620.3 million, including a rise of 14% in tonnage.

“We were pleased with our operating performance during the first quarter, although our productivity was negatively impacted by the severe winter weather and more restrictive hours-of-service regulations,” CEO David Congdon said.

Ryder System Inc. raised net income to $49.1 million, or 92 cents. Revenue increased 4% to $1.32 billion. Leasing unit profit before taxes rose 27% to $77 million, but weather woes reduced logistics profitability 11% to $21.8 million.

“We expect the positive trends we’ve seen in the performance of our commercial rental and used vehicle sales products to continue,” said Robert Sanchez, CEO at Ryder, where the forecast for annual earnings was raised by 10 cents per share.