Photo credit: Barry Blackburn / Shutterstock, Inc.
Last week I was able to report good news from the railroads. Fourth-quarter results show profits were being made across the board. (The exception was Kansas City Southern which has its own set of unique problems operating a railroad across the US – Mexico border.) Cost-cutting measures bringing operating ratios down were the prime drivers of profits, but hopeful economic signs are starting to show.
Lance Fritz, CEO of Union Pacific, was particularly excited about the economic outlook:
“Higher energy prices, favorable agricultural markets and improving business and consumer confidence all support a return to positive volume growth this year.
So on this positive note I decided to turn my attention to the trucking industry for similar signs of optimism.
Not So Good News
Swift Transportation, the largest truckload carrier in the US, reported fourth-quarter profit fell 30% to $50.4 million. Operating revenue fell 4.7% to $1.04 billion. This was even after they took 210 trucks after their fleet in the fourth quarter.
Knight Transportation reported a fourth-quarter net income of $22.2 million, a 24.2% decline, and operating revenues of $289.1 million, a decline of .6%.
Werner’s fourth quarter net income fell 40% to 21.8 million. Total revenue fell 2% to $518.8 million.
Roadrunner Transportation Services Inc. said it would restate earnings reports for the past three years, citing various accounting errors found in ongoing audits. Shares fell 30%.
JB Hunt reported a fourth-quarter net earnings of $117.6 million, a .7% increase. This included a one – time after tax benefit of $9.5 million for a change in the company’s paid time off policy. Operating revenues for the same quarter rose 6.2% to $1.7 billion.
JB Hunt are one of the very few trucking companies to report good news. They had a good 2016 reporting net earnings of $432.1 million – an increase of 1.1%, and operating revenues of $6.6 billion – a 5.9% increase.
So What is Going On?
So what is going on with trucking companies? Here’s an excerpt from the 22nd December IPO filing from Schneider:
“Trucking is the primary means of serving the North American transportation market and hauls approximately 70% of freight volume within the United States, which is embodied in a common phrase used within our industry: ‘if you’ve got it, a truck brought it’ – Schneider National S-1 filing, 22 December.
You would think that with a lock on such a large segment of an industry trucking companies would be making money – but they are not. In my humble opinion it’s an industry stuck in an outmoded way of doing things and it’s not going to change without an external disruptive force. It’s a common theme I return to often.
The Largest Outdated Industry in the Country
And I am not the only person to think like this:
“Trucking is probably the largest outdated industry in the country,” said Convoy founder Dan Lewis.
Convoy is an on-demand freight marketplace for regional and local trucking that enables shippers to connect with nearby truckers using a mobile app. It is just one of the many well-funded technology driven freight industry disruptors that is growing rapidly.
But the 800 pound gorilla in the room is Amazon who are slowly but surely disrupting the global logistics industry with a unified, big data, technology driven strategy. (More on this in future posts). The trucking industry is low hanging fruit in their eyes. Trucking companies need to figure out a way to survive profitably in an Amazon driven future – fast!
If you’re interested in learning how shipping by rail might better meet your freight transportation needs, or need warehousing to bring your goods closer to your customers, call New Mexico Transloading at 505 – 908 – 1911. We’d be delighted to have a conversation with you.