While the economy continues to grow, it appears to be doing so at a slower rate, and freight...

While the economy continues to grow, it appears to be doing so at a slower rate, and freight yields are coming under increasing pressure, HDT's Contributing Economic Analyst Jeff Kauffman.

Graphic: HDT

Publicly traded trucking and transportation companies delivered mixed third-quarter earnings, with somewhat subdued fourth-quarter outlooks attributable to pre-shipping of peak season inventories and a modestly weakening consumer.

Overall, 2022 earnings per share outlooks have been lowered by about 2.7%. So, while the economy continues to grow, it appears to be doing so at a slower rate, and freight yields are coming under increasing pressure.

While volumes overall were in-line to slightly lower than expected, revenue yields slowed, resulting in about 16% revenue growth across trucking businesses.

Operating costs rose by about 18%, resulting in lower overall operating margins for truckers.

  • Labor costs rose by about 21% on average.
  • Fuel costs were about 77% higher for truckload carriers and 46% higher for LTL companies.
  • Purchased transportation costs slowed to an average 7% increase on lower spot rates.
The brokerage business saw the most dramatic slowdown in revenue growth last quarter, thanks to...

The brokerage business saw the most dramatic slowdown in revenue growth last quarter, thanks to lower spot market rates.

Source:  Company Reports, Tahoe Ventures, LLC

Earning Results by Truck Segment

Over-the-Road Truckload Carriers

OTR truckload carriers were the weakest of the truck sectors on a year-over-year basis, registering an average operating ratio deterioration in the third quarter of 225 basis points to 88.5%.

This was accomplished on 11.6% overall revenue growth — a function of 6.3% more trucks, a 16.4% improvement in fully loaded revenues per mile, and a 3.8% decline in miles per truck. This compares to an average revenue per mile growth of 27.6% last quarter. Labor costs were 20.6% higher, but this expense is leveling off as drivers are becoming easier to find.


LTL carriers overall reported healthier results, with 140 basis points of margin improvement and an average operating ratio of 83.7% on 15.4% average revenue growth. That’s stronger than OTR truckload.

The breakdown showed some economic deterioration as shipments were 2.5% slower and weight per shipment declined by 1.2%, implying about 3.7% lower tonnage. Yield improvement of 17.5% outgrew labor cost inflation of 7.2%. While fuel costs were 46.2% higher, purchased transportation expenses here were 2.2% lower than last year.

Dedicated Truckload

Dedicated fleet operations saw the best margin improvement of all trucking groups in the third quarter at 200 basis points, or a 91.2% operating ratio, as yield increases are catching up with inflation.

Revenues grew 23.3% on 7.5% average fleet growth, a 20.9% improvement in yields. Average miles/vehicle was also lower, down 2.6%.

Truck Brokerage

The brokerage business saw the most dramatic slowdown in revenue growth, thanks to lower spot market rates. Revenues grew just 3.9% on 3% average volume growth and negative revenue yields. In our view, there is also a trade-down occurring out of brokerage markets back to contract truckload. This resulting in a 35 basis point improvement in operating ratio to 94.8%.

6 Takeaways from Third-Quarter Earnings Reports

Some of the key observations that came out of the earnings reports:

  1. 3Q/4Q freight volumes will lack the normal peak season and holiday boost, but not because of weak demand. While consumer spending has been slowing, the real culprit here is high inventories. Shippers are adamant that this is not a read into 2023 at this time.

  2. Capex budgets are being reduced, but not because of weaker profit margins. Rather, improving but continued OEM equipment delays are keeping most companies on allocations into 2023, and are pushing capital expense numbers from 2022 into 2023.
  3. Spot truck rates and ocean container rates have round-tripped to pre-pandemic levels. The driver in the trucking market is a shift of spot freight back to contract markets. Ocean rates are seeing improved port congestion and high inventory levels, resulting in blank sailings and faster sailing times to the West Coast.
  4. Rail network fluidity is improving. While 3Q averages remain subdued, end-of-quarter speed improved about 10% for the industry, and dwell times were approaching double-digit improvements as well.
  5. Contract truck pricing could be nearing an inflection point. Truck spot rates have leveled off near 2018 levels, but contract rates remain elevated. However, the second derivative of pricing appears to be turning, and we look for lower growth rates ahead as customers re-bid larger pieces of their networks in 2023.
  6. The over-earnings party continues for used truck equipment. Dealership inventories remain lean and used equipment prices have come down off their peak, but used trucks remain in strong demand. Ryder’s 83% utilization remains near record levels.

This commentary was published in the November/December 2022 issue of Heavy Duty Trucking. 

More from Jeff Kauffman's Behind the Numbers column: What Q2 Earnings Tells Trucking About Market Trends

About the author
Jeff Kauffman

Jeff Kauffman

Contributing Economic Analyst

A recognized authority in trucking, logistics and transportation equipment, Jeff Kauffman has been a frequent contributor to national news outlets on economic and trucking industry trends. The longtime global head of freight transportation research for Merrill Lynch, he now heads up his own transportation consulting firm, Tahoe Ventures. He is also principal at Vertical Research Partners.

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