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Earnings Watch: Swift, UPS, PAM, Roadrunner

Some of the nation’s largest fleets have reported mixed financial results or expectations as the freight environment in the third quarter has remained soft.

by Staff
October 27, 2015
Earnings Watch: Swift, UPS, PAM, Roadrunner

 

6 min to read


Some of the nation’s largest fleets have reported mixed financial results or expectations as the freight environment in the third quarter has remained soft.

Swift Transportation Profit Declines

One of the nation’s largest carriers reported a decline in profit for the third quarter as it increased its fleet size and had higher wage costs.

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Swift Transportation Co. had net income of $36.2 million, or 25 cents per diluted share, compared to $50.2 million, or 35 cents per share, the same time in 2014.

Total revenue was $1.064 billion versus $1.074 billion a year earlier. However, revenue minus fuel surcharge improved to $955 million from $881.8 million.

The Arizona-based carrier said its average operational truck count increased 831 trucks, or 4.8%, year-over-year in the third quarter, including a 517-unit increase from the beginning of 2015 through the end of last month.

"We have pulled back on our initial growth targets given that the freight environment is softer than we originally expected, and peak volumes have not yet materialized as in years past.”

“On a full-year basis we expect average operational truck count growth of roughly 500-600 for the year, which is below the low end of the 700-1,100 growth previously disclosed,” Swift said in its letter to shareholders. “We have pulled back on our initial growth targets given that the freight environment is softer than we originally expected, and peak volumes have not yet materialized as in years past.”

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In the company’s truckload business, revenue minus fuel surcharge increased 6.4%, driven by a 3.6% increase in revenue minus fuel surcharge per loaded mile and a 2.8% increase in total loaded miles driven.

Dedicated business revenue minus fuel surcharge grew 8.9%, as weekly revenue minus fuel surcharge per tractor improved 5.7% year-over-year, due to increased customer pricing. Total loaded miles driven increased 3%.

Swift Refrigerated (previously Central Refrigerated Service) saw revenue remain relatively consistent at $81 million.

Intermodal revenue less fuel surcharge grew 9.9%, fueled by container-on-flat-car growth of 11.3% but was partially offset by a continued reduction in trailer-on-flat-car volumes. Container turns improved 6.7% year-over-year.

On the expense side, Swift said salaries, wages and benefits increased $43.8 million to $283.8 million during the third quarter of 2015, compared to a year earlier “due primarily to increases in total miles driven by company drivers within the period, the two previously disclosed targeted driver pay rate increases in August 2014 and May 2015, and adverse current-year development of prior-year claims in workers' compensation expense.”

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Swift last month lowered its profit projections for the final two quarters of the year due in large part to at least one accident, legal claims and expected lower freight volume.

There is more in the Swift letter to shareholders on the company website.

UPS Profit Moves Higher

United Parcel Service Inc. (UPS) reported a 3.5% increase in earnings in the third quarter, despite lower revenue, as its preparations for the peak holiday season are under close scrutiny.

Net income totaled $1.26 billion for the third quarter compared to $1.21 billion a year ago as total revenue edged down 0.4% to $14.25 billion, due to lower fuel surcharges and currency exchange rates, according to the company

Diluted earnings per share were $1.39, a 5.3% increase over the same period last year.

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Total company shipments increased 1.9% over the third quarter last year to 1.1 billion packages, led by U.S. air products and European transborder shipments.

“Third quarter results reflect strong progress on our long-term initiatives despite uneven economic conditions,” said David Abney, UPS CEO.

UPS supply chain and freight revenue increased slightly to $2.4 billion. Lower forwarding revenue and a drop in less-than-truckload (LTL) tonnage was offset by the addition of revenue from Coyote Logistics, according to the company. Despite approximately $20 million in Coyote transaction fees, total segment operating profit increased to $219 million. UPS closed on its Coyote Logistics acquisition midway through the quarter.

UPS Freight revenue dropped 8.6% to $740 million due to lower fuel surcharges and reduced LTL tonnage during the quarter, according to the company. Changes in fuel surcharges contributed to about 600 basis point reduction in the revenue growth rate. Soft market demand combined with selective pricing initiatives also contributed to the decline.

U.S. domestic package revenue totaled $8.9 billion, up 1.9% over the same quarter last year.

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Despite the "uneven economic conditions," UPS said it expects a 10% increase in packages over the holidays. It has plans on how to handle the surge this time without another overrun on costs or being caught short-handed. One of its tactics will be last-minute hiring, bringing workers on just days before they’re needed.

A more detailed rundown of the company’s financial performance is on the UPS website.

P.A.M. Reports Second Highest Earnings, Plans Expansion

P.A.M. Transportation Services Inc. (PTSI) recorded a 14.6% improvement in net income from a year earlier, totaling $5.8 million.

Diluted earnings per share moved higher to 80 cents from 63 cents in the third quarter of 2014, while total revenue remained essentially flat at $107.1 million. In contrast, revenue, before fuel surcharge, increased 12.1% to $92 million for the third quarter of 2015, as fuel surcharge revenue fell 39.6%.

“The second quarter of this year was our best earnings quarter on record and this quarter represents our second best earnings quarter on record,” said Daniel H. Cushman, president and CEO. “Our goal this year was to grow while continuing to operate at the same or better profitability levels as those established in 2014. Growth has been difficult with the challenging driver market, but we have had some success.”

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According to Cushman, the company is adding terminal locations “based upon our existing footprint, customer locations, and potential driver availability.” It recently purchased one in Ohio and is exploring terminal locations on the West Coast.

There is additional information from Globe Newswire.

Roadrunner Expects Lower Numbers

Asset-light trucking and logistics provider Roadrunner Transportation Systems Inc. (RRTS) has revised expectations ahead of releasing its third quarter earnings.

It anticipates revenues for the third quarter to be in the range of $490 million to $500 million and diluted earnings per share, excluding transaction expenses, to be between 14 cents and 17 cents.

“The reduction in the third quarter 2015 guidance reflects the following items: losses associated with the termination of certain independent contractor lease purchase guaranty programs, which are expected to have an impact of 8 cents per share; and charges associated with increased accidents and a corresponding increase in insurance and claims expense, which are expected to have an impact of 6 cents per share; and continuing soft demand for truckload (TL), less-than truckload (LTL), and intermodal services from customers in selected industrial sectors,” the company said in a statement.

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According to Mark DiBlasi, president and CEO, historically, the third quarter starts slow and finishes strong.

“In 2015, July volumes were weaker than normal, and we did not see the typical rebound in August and September, resulting in lower volumes than anticipated. Our TL segment is heavily weighted toward refrigerated food items, which were impacted by lower than expected poultry, beef and produce freight due to the recent Midwest and West Coast droughts and the bird flu epidemic,” he said.

Intermodal volumes were also lower than anticipated, especially in the West Coast ports.. The company said its LTL segment was hit by an overall weak economic climate in the markets it serves, particularly in September. Excess capacity during the quarter put downward pressure on non-contractual pricing across all of Roadrunner's segments, particularly spot market pricing and certain LTL pricing, according to the company.

DiBlasi said the company does not foresee a significant rebound in demand or pricing in the fourth quarter.

“Accordingly, for the fourth quarter of 2015, we anticipate our revenues to be in the range of $485 million to $510 million and our diluted earnings per share available to common stockholders, excluding transaction expenses, to be between 31 cents and 35 cents,” he said.

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