Land Line Now online: Freight market report from DAT
Truckload Linehaul Rates Remain Soft, Intermodal Rates Continue Steep Drop
Truckload linehaul rates in June were nearly the same as the month before, but they are still below levels from a year ago, while there seems to be no end to the recent drop in rates for intermodal shipments.
The Cass Truckload Linehaul Index fell another 1.8% year-over-year, after falling 2.3% and 1.2% in April and May, respectively, representing four consecutive months of year-over-year declines.
The index, which posted a reading of 121.2 in June, its lowest level since August 2014, fell 0.1% from May, the third straight monthly drop.
Analysts at the investment firm Avondale Partners, which provides analysis of the index, have further adjusted their pricing forecast range downward for the remainder of 2016 to a 1% to a 3% decline.
The report says several factors continue to contribute to the excess capacity that has caused rates to drop, including driver pay increases, overall fleet growth, reduction in carrier bankruptcies and an easing of the controversial 34-hour restart rule.
The index is an indicator of market fluctuations in per-mile truckload pricing, isolating the linehaul component of full truckload costs from other components, such as fuel and accessorials, providing a look at trends in baseline truckload prices.
Meantime, Cass Intermodal Index fell another 1.5% year over year in June, representing 18 consecutive months of year-over-year declines. Its reading of 121.1 also represents a 4.3% drop in June from May and is at its lowest level since January 2011.
Historically, there is a "high degree of correlation between truckload and intermodal pricing," said analysts with Avondale Partners. As contract rates for trucking continue to lose strength and move further into negative territory, “[this] would imply even more potential weakness for intermodal pricing."
The Cass Intermodal Price Index is a measure of market fluctuations in per-mile U.S. domestic intermodal costs that includes all costs associated with the move, such as linehaul, fuel and accessorials.
Data within both measures is derived from actual freight invoices paid on behalf of clients of payment processor Cass Information Systems, which totaled $25 billion in 2015.
Surprisingly, the figures follow a report from the day before showing freight shipments and expenditures edged up in June after three months of lackluster performance, hitting their highest levels of the year, according to the Cass Freight Index – but it remains unclear whether this is part of a larger trend.
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Landstar Profit Sinks 20%, Falls Short of Expectations
Asset-light trucking and related services provider Landstar System Inc. (NASDAQ: LSTR) reported a 20% second quarter decline in earnings due to lower revenue and a big insurance claim.
The Florida company reported net income of $32.3 million, or 76 cents per share, down from $40.5 million a year earlier, or 92 cents per share. The earnings per share was less than a consensus estimate of 82 cents from analysts and below updated guidance issued by Landstar in early June. Back in April it was expecting second-quarter earnings of 80 cents to 85 cents per share.
“Net income was negatively impacted by elevated insurance and claims costs, driven mostly by the severity of claims ... the highest quarterly insurance and claims cost over the past six years,” the company said in a statement. It did not elaborate about the claim
Total revenue during the second quarter fell to $775.2 million from $868.4 million, in line with the company's June expectations. Truck transportation revenue hauled by independent contractor drivers and truck brokerage carriers during the quarter was $718.5 million, compared to $809.2 million in the 2015 second quarter.
Landstar's truckload transportation revenue hauled by van was $458 million, down from $496.9 million a year earlier. During the same time, truckload transportation revenue hauled via unsided/platform equipment fell to $242 million from $291 million. Revenue from freight hauled by rail, air and ocean cargo carriers was $45.1 million, compared to $48.1 million, in the 2015 second quarter.
"Overall, from a revenue standpoint, I believe we executed well considering the sluggish freight environment," said Landstar President and CEO Jim Gattoni. He pointed out that comparisons to last year's second quarter are thrown off because of more than 13,000 truckloads on platform trailers hauled for a project for a single automotive customer that was resposible for $27 million in revenue last year. "Excluding the loadings related to that project, we experienced a slight increase in loads hauled via truck over the 2015 second quarter.”
He said Landstar's truckload services continued to experience significant pricing pressure throughout the 2016 second quarter, as industry-wide truck capacity was more readily available as compared to the 2015 second quarter and demand continued to be soft.
“Although we experienced a somewhat normal seasonal uptick in revenue per load from May to June, the pricing pressure continued in the U.S. spot market, in which the company operates much of its business,” Gattoni said. “Additionally, the average cost of a gallon of diesel fuel was approximately 20% lower during the 2016 second quarter compared to the 2015 second quarter, putting additional pressure on pricing, especially as it relates to loads hauled via truck brokerage carriers.”
The result: Revenue per load on freight hauled via truck was 9% lower in the 2016 second quarter compared to the 2015 second quarter.
Looking at the current third quarter of the year, Landstar said it is experiencing the normal seasonal uptick in revenue per load on loads hauled via truck and expects revenue for the period to be similar to second quarter revenue.
Landstar also announced on Wednesday that its board of directors has declared a quarterly dividend of 9 cents per share, 12.5% higher that it was in each of the previous four quarters.
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FMCSA Delays Online DOT Registration System Implementation
The Federal Motor Carrier Safety Administration is delaying the implementation of the final stage of its simplified online registration process, called the Unified Registration System, until Jan. 14, 2017.
The FMCSA has also set the full compliance date for April 14, 2017. The agency is currently updating its information technology systems and moving millions of records to remote storage servers. This work is creating a foundation that will allow the FMCSA and its state partners to successfully launch the final stage of URS, according to the agency.
The Unified Registration System is a process that combines multiple legacy reporting forms into a single, online “smart form” that is designed to streamline the registration and renewal process. The system was created to improve efficiency and reduce errors and was originally supposed to be fully implemented this year.
When fully implemented, the URS will allow FMCSA to identify unfit carriers and detect unsafe truck and bus companies that are trying to evade enforcement actions. Offending companies often attempt to regain U.S. DOT registration by registering as a different or unrelated business entity.
The agency estimates that the initial phase of URS, which was launched in December 2015, has saved the industry around $1.6 million in processing time in its first six months. The FMCSA has issued 62,000 U.S. DOT numbers and removed 340,000 dormant U.S. DOT numbers from its agency databases and screened 100% of operating authority applications for reincarnated carriers.
Related: FMCSA Launches Improved Online DOT Registration
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