Truckers Blame Declining Profits on Weak Freight Demand

April 21, 2016 by Tony Dreibus

Big trucking companies blamed sluggish freight demand for missing investor profit expectations in the first quarter.

Omaha-based Werner Enterprises Inc. reported on Wednesday that net-income fell 13 percent to $20.1 million in the first quarter, compared to the same period a year earlier. That amounted to earnings of 28 cents per share, missing analyst expectations for 32 cents. Revenue totaled $482.8 million in the three months that ended on March 31 versus forecasts for $494.3 million.

“Freight demand was softer than the first quarters of 2015 and 2014,” the company said in Wednesday’s earnings report. “Demand showed normal seasonality (while) demand to date in April 2016 has been sluggish and softer than most April periods.”

Per-tractor revenues decreased 2.4 percent in the quarter compared to the same period a year earlier, Werner said. Average miles fell 1.5 percent while revenues per mile decreased 0.9 percent.

Knight Transportation, based in Phoenix, also missed on earnings and revenue.

Net-income totaled $22.6 million in the first quarter, down 24 percent from the same three months a year earlier, the company said.

That amounted to earnings-per-share totaled 28 cents, down from expectations for 29 cents, the firm said in a Wednesday report. Revenues were $272.1 million, missing Wall Street analysts estimates for $279 million. Knight attributed the miss to excess capacity, higher inventory rations and weak U.S. industrial production in the quarter.

“The freight environment was less attractive in the first quarter of 2016 compared with the same quarter a year ago,” Dave Jackson, Knight’s chief executive said. “Opportunities in the non-contract market were challenged by falling load counts and additional price competition.”

Jackson said the rest of 2016 looks bright as declining new truck orders, recent expansion in industrial production and increased regulation that will slowly be phased in will improve the environment.

Landstar System, a Jacksonville, Fla., company that acts as a brokerage between owner-operators and shippers beat expectations. It reported net-income fell 2.8% to $29.2 million for the first quarter. That amounted to per-share earnings of 69 cents, topping forecasts for 67 cents per unit.

Revenues totaled $711.6 million, missing projections for $717.3 million. The company said its board declared a quarterly dividend of 8 cents per share payable on May 27.

Landstar Tractor Trailer in Motion

Landstar System also suffered declining profits. (Photo: Rennett Stowe/Flickr)

Landstar experienced pricing pressure in the first quarter due to more readily available truck capacity and lower diesel costs – down 25 percent from the same quarter in 2015. That pushed revenue per-truckload down 10 percent versus the prior-year timeframe.

“Despite the softer pricing environment, 2016 first quarter operating margin was … in line with seasonal historical first quarter results,” said Jim Gattoni, Landstar’s chief executive.

Illinois Tool Works Inc., a manufacturer of components and equipment, topped forecasts for both earnings and revenues.

The Glenview, Ill.-based company said income rose 2.2% to $468 million in the first quarter. That amounted to earnings of $1.29 per share, beating forecasts for $1.26, and revenues totaled $3.27 billion against projections for $3.25 billion. E. Scott Santi, the company’s chief executive, said he was “pleased” with Illinois Tool Works’ first quarter.

“In a challenging environment, the company continued to deliver meaningful improvement in all of our key performance metrics: organic growth, (earnings), operating margin, return on invested capital and free cash flow,” Santi said.