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Problems May Be in the Past for Less-than-Truckload Sector

Image via Flickr by Kolin Toney

The less than truckload sector of the trucking industry, the part that handles small parcels of freight including UPS and FedEx, has struggled with high costs, low profits, and poor earnings ratios for decades. This sector also took some of the hardest hits to the transportation industry during the economic crisis that began in 2008. According to Supply Chain Digest, these woes are possibly a thing of the past. The sector has seen increased profits, decreased operational costs, and other signs of strength for the first half of 2013. This is especially good for the carrier YRC Worldwide, which almost failed during this time.

Supply Chain Digest tracks five publicly traded less than truckload carriers, excluding UPS and FedEx, as these companies do not report their earnings in a form conducive to the analysis performed by the publication. According to American Trucking Associations figures for all trucking volumes, including less than truckload, profits were up 4.3 percent from April 2012 to April 2013, up 6.5 percent from May 2012 to May 2013, and up 5 percent from June 2012 to June 2013. Actual tonnage isn’t up much, however, with an increase of just 1.2 percent during this same time period.

Four out of the five publicly traded less than truckload carriers tracked operated in the black for the second quarter of 2013, with a group revenue increase of 3.6 percent. Old Dominion, as usual, showed the strongest growth in revenue at 8 percent. Old Dominion’s tonnage was up an impressive 5.6 percent and profits for the company were up 21.8 percent.

Profit for the entire sector is up 13 percent. All five carriers managed to improve their operational ratios (a measure of working expenses divided by operating revenue) down into the low range around 90 percent, which is consistently poor for the trucking industry. The group average is 93.4 percent, while Old Dominion stands at 83.5 percent. If Old Dominion’s number is removed, the group total jumps to 95.8 percent. This is the first time in many years all the companies have been lower than 100 percent.

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