Weather, Politics Slow Business in 1Q for Privately Held Fleets

This story appears in the April 8 print edition of Transport Topics.

As publicly traded carriers begin reporting first-quarter results later this week, executives from privately owned fleets told Transport Topics that the first three months of 2013 were choppy, with freight growth hampered by winter weather and uncertainty over federal economic policies.

“I would classify it as a very uneven quarter,” said Scott Arves, CEO of Transport America. “January was better than expected, February was very disappointing and March was very strong.”

“We are in an uncertain period, with a lot of choppiness,” Arves said. “The economy is trying to succeed in spite of our government, not because of it.”

Transport America ranks No. 60 on the Transport Topics Top 100 list of the largest for-hire fleets in the United States and Canada.

Ike Brown, vice chairman of No. 24, NFI Industries, sketched a similar pattern.

“January volumes started off fairly strong, but February was just the opposite,” he said. “Freight fell off the map. March volumes started to pick up again, but it was day-to-day, week-to-week, and up and down. Freight just was not robust.”

The 19 publicly traded fleets in the for-hire TT 100 are expected to report modestly improved results, with 5% revenue growth or less, and earnings improvement of less than 15%, based on a Bloomberg News survey.

Because of regulatory disclosure restrictions, these firms do not speak publicly until earnings are announced.

On a revenue basis, results for Arkansas Best Corp. (No. 13), Roadrunner Transportation (No. 32) and Universal Truckload Services (No. 39) likely swelled because of acquisitions since last year’s first quarter. No. 7, Swift Transportation, is expected to show the fastest profit growth at 29%.

Looking back on the quarter, Billy Hupp, chief operating officer for privately held Estes Express Lines, also offered a mixed picture.

“We had some pretty good signs that things were looking better,” he told TT. “Then they would just flicker out as fast as they appeared. All in all, we think we are going to have a little increase in freight.”

Estes ranks No. 15 on the for-hire TT 100.

“Things are moderately better than last year’s first quarter,” Robert Low, founder of No. 23, Prime Inc., said.

“The first quarter is traditionally a low-volume time of the year, and we’ve seen that pattern upheld so far,” said Wayne Spain, chief operating officer of No. 29, Averitt Express, Cookeville, Tenn. “Our efficiency and productivity levels are very strong, putting us in an ideal position for the coming months.”

There was broad agreement that more typical weather this year, following an abnormally warm winter last year, wasn’t helping.

“We had a lot more winter than in 2012,” said Mike Cronin, executive vice president of No. 76, Dayton Freight Lines. “It was a pretty typical first quarter.”

Business that was pulled forward last year from April and May didn’t materialize this year, he said.

“There was definitely a cost headwind due to weather,” said Tom Connery, chief operating officer of No. 56, Shevell Group. He said the company lost 1.5 days of business because of weather.

“The quarter began a little rough in January and the first half of February,” Connery said. “Then it showed improvement. We are up low single digits in terms of tonnage and revenue.”

Hupp, who heads a less-than-truckload fleet, sounded a similar note.

“Last year, there was almost no [winter] weather,” he said. “The weather was just brutal for us this year.” Estes had snow that affected operations somewhere in its system every day during the quarter.

Hupp said the industry’s efficiency has improved, allowing carriers to still improve profits, even when revenue doesn’t rise at a double-digit pace.

“Weather impacted us more so than last year,” said Steve Gordon, chief operating officer of Gordon Trucking, which ranks No. 62.

“The first six weeks was pretty flat,” he said. “That’s not atypical. Things started picking up in mid-February, and demand was pretty strong in March. Once that weather effect started dissipating, the home improvement and building products began to move.”

Britt Colley, president of No. 81, Epes Carriers, also cited improving retail freight demand.

“We were starting to see some spring push at the end of March by retailers that we hope will continue into April,” Colley told TT.

“It’s been a pretty good first quarter,” he said, with 9% higher revenue. “Business levels have been very steady. January and February stayed pretty strong, and March continued in the same way.”

Geoff Muessig, executive vice president at No. 68, Pitt Ohio, also said freight was strong at the company, with volumes exceeding expectations at both LTL and truckload units.

There were other peaks and valleys, including surges in freight levels on load board indexes during January and March.

Analyst comments on first-quarter trends mirrored the executives’ insights.

“The first quarter of 2013 saw modest volume growth, but flat to slightly contracting sequential net transport margins,” said Thom Albrecht, a BB&T Capital Markets analyst.

“Domestic and international uncertainty persists,” said John Larkin, a Stifel, Nicolaus & Co. analyst. “Weather was so mild in the first quarter of 2012 that some shipments were pulled forward into the first quarter, an occurrence that is not happening in the first quarter of 2013.”