Leading US truckers struggle in a weak market

The US trucking market is not buoyant but some trucking companies are dealing better with this than others.

Knight-Swift Transportation, which announced its first quarter results on April 17, described the period as “challenging” with the full truckload sector continuing to be “oversupplied with capacity”. The company said that shippers were “still trying to push rates down further” but that Knight-Swift was not willing “to commit to further concessions on what we view as unsustainable contractual rates”. Knight-Swift saw revenue up 11.3% year-on-year yet operating income fell by 85.8% to US$20m, whilst the company fell into a net loss of $2.6m for the quarter.

Old Dominion Freight Line in contrast saw both revenue and net income over the quarter more or less flat, up 1.2% and 2.5% year-on-year respectively. Also, in contrast to Knight-Swift, freight rates increased, and revenue per hundredweight was up 6.7% across its ‘less-than-trailer load’ business however volumes handled fell by 3.2%. Profitability was also supported by stronger asset utilization. Old Dominion’s strength may in part be explained by the general competitiveness of ‘less than trailer load’ services.  

Landstar System suffered more harshly over the quarter than Old Dominion. Revenue fell by 18.4% and operating income by 40.8% year-on-year. Landstar saw truckload volumes fall by 13% year-on-year whilst revenue per load fell by 7%. This performance was better than the seasonal average and that which Landstar expected. In an interesting piece of data, Landstar broke down revenue growth by sector, illustrating that demand in industries such as automotive and consumer durables fell sharply, with the latter down 20%.

The clear implication of these numbers is that the US road freight market continues to be, if not depressed, then struggling. Volume growth is poor even in consumer-facing sectors and this has had the effect of forcing a shrinkage in the supply trucks onto the market. It is a contrast to the early part of 2023 which saw continuing robustness demand straining the supply side. It is notable that labour-cost pressures are less salient than they were despite continuing high levels of employment in the economy generally. If the wider economy slows the condition of the road freight market might be painful.

Author: Thomas Cullen

Source: Ti Insight

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