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