Two trucking companies on Monday announced huge increases in their earnings for the final quarter of 2017 and for all of last year, both due to changes made by Congress in federal tax laws.
Werner Enterprises Inc. reported net income for the fourth quarter increased 547% from the same time in 2016, totaling $141.1 million, or $1.94 per share, while total revenues moved up 9% to $567.4 million.
For all of 2017, net income improved 156% from 2016 to $202.9 million, or $2.80 per share, while revenue moved 5% higher to nearly $2.12 billion.
According to the company, both the quarterly and annual results included a $110.5 million, non-cash reduction in income tax expense, which resulted from its revalued net deferred income tax liabilities to reflect the lower federal income tax rate enacted in the last of 2017. It lowered Werner’s federal corporate income tax rate to 21% from 35% beginning in 2018.
Excluding the non-cash income tax reform benefit, Werner’s performance from period to period, earnings per diluted share were 42 cents and $1.27 for fourth quarter 2017 and full year 2017, respectively.
Werner also said fourth quarter 2017 freight demand in truckload fleet was strong.
“Freight in October 2017 was seasonally better than normal, and demand strengthened further in November and December,” the company said. “Freight volumes thus far in January 2018 have been much stronger than normal for January.”
Average revenues per tractor per week increased 4.1% in fourth quarter 2017 compared to fourth quarter 2016 due to a 4.7% increase in average revenues per total mile and a 0.6% decrease in average miles per truck, according to Werner. Growth in shorter-haul dedicated compared to longer-haul one-way truckload had a favorable impact on revenue per total mile and an unfavorable impact on miles per truck.
Werner noted that freight metrics are improving and the company has increasing confidence that contractual rates will strengthen over the next few quarters.
Covenant 4th Quarter Profit Skyrockets More Than 700%
The parent company to trucking operations Covenant Transport, Southern Refrigerated Transport and others reported similar results and for the same reason.
Covenant Transportation Group Inc. said its fourth quarter 2017 net income jumped more than 700% from the same time in 2016, totaling $49.3 million, or $2.68 per share, as total revenue improved 6.5% to $203.4 million.
In the fourth quarter of 2017, net income included $40.1 million, or $2.18 per diluted share, of income tax benefit resulting primarily from what the company said was its reasonable estimate of the revaluation of net deferred tax balances as a result of the recently enacted Tax Cuts and Jobs Act passed by Congress in December.
For all of 2017, the results were also dramatic, with net income increasing more than 200% for 2016, totaling $55.4 million, or $3.02 per share, while total revenue increased 5.1% to $705 million.
According to Chairman and CEO David R. Parker, while freight demand was strong and truck capacity was tight during the quarter, the environment had both positive and negative effects on the company’s quarterly results.
“On the positive side, our average freight revenue per loaded mile improved by approximately 2.6% due to contractual rate increases negotiated earlier in the year for our peak business. From a revenue standpoint, we did not participate in the peak spot market to a material extent due to the need to plan our limited team capacity for our valued customer base,” he said. “On the negative side, with the moderate reduction in the number of teams in our fleet coupled with the expanded shipping needs of our customers as compared to the 2016 quarter, additional third-party capacity was required in the 2017 quarter.”
Parker said this third-party capacity was significantly more expensive during the 2017 quarter, forcing the company to increase its team peak season compensation in recognition of the highly competitive driver market.