Nov 162011

LTL sector financial results show gains in Q3

Posted By: Tom Sanderson
Date Posted:  Wednesday, November 16, 2011  2:58 PM

Stifel Nicolaus (www.stifel.com) reported strong year-over-year yield growth and operating ratio improvements for publicly traded less than truckload (LTL) carriers in Q3. The Stifel industry sector Snapshot for the LTL sector showed year-over-year revenue per hundredweight (yield) including fuel surcharge increasing by 10%. That makes 6 straight quarters of rising year-over-year yields for the LTL carriers following 6 straight quarters of declining yields. Operating ratios continued to improve but remain in the mid 90’s. LTL carriers have a way to go to achieve operating ratios in the low 90's as they had achieved before the recession. Weight per shipment leveled off in the quarter but is still at a high point as parcel carriers win smaller shipments and TL carriers only reluctantly accept multi-stop TL shipments. Composite net income, excluding YRCW, is approaching pre-recession levels.

Stifel LTL sanpshot Q311

Graph reproduced with permission from Stifel Nicolaus. For more information contact: JGLarkin@Stifel.com.


Nov 162011

LTL rates surge in Q3

Posted By: Tom Sanderson
Date Posted:  Wednesday, November 16, 2011  8:49 AM

Stephens Inc. reported that third quarter LTL rates increased 4.9% from Q3 2010 and 3.0% from Q2 of 2011. The year-over-year increase is the largest since Q3 2003. Stephens is predicting a 5-6% year-over-year increase in LTL rates in the second half of 2011, but they don't see full recovery of pre-recession LTL pricing even through 2012. In 2010 LTL rates dropped 3.7% (117.7 to 113.3) which followed a larger 4.6% drop from 2008 to 2009. In 2009, LTL carriers were pricing aggressively to win share from weaker competitors. The challenges facing LTL carriers are apparent with pricing in 2011 roughly equivalent to 2004 pricing, despite increases in most trucking related costs. Some of the capacity issues that will impact the TL segment, like CSA 2010 and hours of service, are not as relevant in the LTL segment.

Stephens LTL Q3 2011

Graph reproduced with permission from Stephens Inc. For more information contact: Jack Waldo at jwaldo@stephens.com or Tyler Bozynski at tyler.bozynski@stephens.com


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Categories: Carrier rate graphs
Nov 152011

TL rate levels increase sharply

Posted By: Tom Sanderson
Date Posted:  Tuesday, November 15, 2011  8:15 AM

Stifel Nicolaus (www.stifel.com) reported strong yield gains for publicly traded truckload carriers in Q3 compared with Q3 of 2010. The Stifel industry sector Snapshot for the TL sector showed a gain of 7.8% in revenue per loaded mile excluding fuel surcharge. That level of price increases has not been seen since the severe TL capacity shortages of 2004 and 2005. The rate impact of the heavy bid activity of 2009 is fading and contract rates are rising. Spot market TL rates rose last year but it takes longer for contract rates to expire, so those gains have been slower to materialize. It's been a pretty tough pricing market for the TL carriers for the last four years. Operating ratios deteriorated slightly over Q2 2011 and Q3 2010. Truck utilization also declined from both the prior quarter and same quarter prior year.

Stifel TL sanpshot Q311

Graph reproduced with permission from Stifel Nicolaus. For more information contact: JGLarkin@Stifel.com.


Nov 142011

TL rates continue to rise

Posted By: Tom Sanderson
Date Posted:  Monday, November 14, 2011  9:32 PM

Stephens Inc. released their third quarter 2011 update on publicly traded TL carriers reporting that rates per loaded mile excluding fuel surcharge increased 4.0% over the same quarter last year and 1.2% over Q2 2011. This marks 6 straight quarters of year-over-year gains. Stephens is expecting Q4 2011 TL rates to increase by 3-4%. The data does not necessarily represent the entire TL industry as the publicly traded carriers tend to be larger and more successful in general so are also likely to be more successful in raising rates. In addition, shorter lengths of haul increase revenue per mile without necessarily being indicative of price increases. Average length of haul dropped from 759 miles in 2006 to 609 in Q3 2011. We are in a period of rising TL rates that is expected to accelerate going into 2012 if there is any economic recovery to accompany the capacity and productivity-damaging regulations such as CSA and changes in hours of service.

Stifel TL sanpshot Q311

Graph reproduced with permission from Stephens Inc. For more information contact: Jack Waldo at jwaldo@stephens.com or Justin Long at justin.long@stephens.com


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Categories: Carrier rate graphs
Nov 142011

Flatbed capacity remains very tight

Posted By: Tom Sanderson
Date Posted:  Monday, November 14, 2011  11:35 AM

Morgan Stanley's flatbed freight index continues to fall, but remains high relative to historical patterns. Capacity had eased early in the second quarter but tightened significantly coming out of Q2. The index softened through Q3 and into Q4 but remains higher than all other reference years and is considerably higher (tighter capacity) than the average over the complete time frame. The flatbed market was particularly hard hit by the fall off in housing starts, but gained ground with the growth in U. S. manufacturing. The index measures incremental demand for flatbed truckload services compared to incremental supply. The higher the index the tighter is capacity relative to demand when compared to a prior period.

image

Graph reproduced with permission from Morgan Stanley. For more information contact: Adam Longson at Adam.Longson@morganstanley.com or Bill Greene at William.Greene@morganstanley.com


Nov 112011

CSA BASIC scores have no relationship to carrier accident frequency

Posted By: Tom Sanderson
Date Posted:  Friday, November 11, 2011  1:20 PM

Wells Fargo Senior Analyst Anthony Gallo published his second excellent analysis of CSA proving with the FMCSA’s own data that there is little or no correlation between CSA BASIC scores and motor carrier accidents. You can contract me or contact Anthony directly at anthony.gallo@wellsfargo.com for the full document, but I want to highlight a couple of key points. Wells Fargo analyzed data for 200 large carriers comparing accidents per million miles and accidents per power unit to 3 key BASIC scores. Accidents may not be the best measure of a carrier’s safety since there is no indication of who was at fault in the accident or the severity of the accident, but one would still expect that carriers with few accidents are generally very safety conscious in their driver and equipment management strategies.

The analysis shows little or no correlation between the CSA BASIC scores for Unsafe Driving, Fatigued Driving, and Driver Fitness and accidents per million miles or accidents per power unit. Everyone wants to see continued reductions in truck-related accidents, and I am sure nobody is going to speak out in favor of “unsafe drivers” or “fatigued drivers”. It appears though, that the key CSA measures that would indicate a carrier should be a candidate for further scrutiny bear no relationship to the actual safety performance of those carriers. This is one of numerous reasons that shippers and brokers should not be using CSA data to create their own carrier credentialing methodologies.

The first graph shows the low correlation between the Unsafe Driving BASIC and accidents per million miles.

WF Unsafe driving BASIC

The Unsafe Driving BASIC r-squared of .042 means that the score accounts for 4.2% of the variance in the accidents per million miles. In plain English, the score bears no relationship to accident history. Carriers with very high (bad) Unsafe Driving scores may have very low accident rates or may have higher accident rates. Similarly, carriers with very low (good)Unsafe Driving scores may have high or low accident rates.

The second graph shows the correlation between Fatigued Driving and accidents per million miles. There is even less correlation for this basic. There is virtually no relationship between the BASIC score and accidents per million miles.

WF Fatigued driver BASIC

Finally, the graph for Driver Fitness, while showing a slightly better correlation, has an r-squared of .055, indicating again that there is almost no relationship between the BASIC score and accident history.

WF Driver fitness BASIC

If you are a shipper or broker and are using CSA scores to decide which carriers to use, you should stop immediately. You are doing nothing to improve safety on our highways. You are harming small businesses in our country by denying freight to carriers that are authorized by the federal government to operate in interstate trucking. You are harming your own bottom line by failing to use carriers that provide the right combination of rates and service to meet your needs. You are harming our industry by potentially putting out of business perfectly good carriers at a time when we are on the precipice of a significant capacity shortage.


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Categories: CSA 2010
Nov 112011

Refrigerated capacity remains extremely tight

Posted By: Tom Sanderson
Date Posted:  Friday, November 11, 2011  9:32 AM

Morgan Stanley's refrigerated truckload freight index shows very tight capacity. The index was up and down through Q2 and early Q3, but is now at a very high level not only for 2011, but for for the series. Refrigerated capacity is very tight relative to all of the reference years. The pricing environment in this segment clearly favors the carriers at this point. The index measures incremental demand for refrigerated truckload services compared to incremental supply. The higher the index the tighter is capacity relative to demand when compared to a prior period.

image

Graph reproduced with permission from Morgan Stanley. For more information contact: Adam Longson at Adam.Longson@morganstanley.com or Bill Greene at William.Greene@morganstanley.com


Nov 112011

Truckload van capacity-demand balance at normal levels

Posted By: Tom Sanderson
Date Posted:  Friday, November 11, 2011  9:29 AM

Morgan Stanley's dry van truckload freight index indicates capacity-demand balance remains very near the long term average for this time of year but that capacity is more tight than in 2010. Capacity had been more readily available than 2010 since the lines crossed in April, but they crossed again in September, indicating tighter capacity this year. Our view is that until the economy recovers, we are not likely to see significantly tighter capacity and that is unlikely until some time in 2012. The index measures incremental demand for dry-van truckload services compared to incremental supply. The higher the index the tighter is capacity relative to demand when compared to a prior period.

image

Graph reproduced with permission from Morgan Stanley. For more information contact: Adam Longson at Adam.Longson@morganstanley.com or Bill Greene at William.Greene@morganstanley.com


Nov 112011

Domestic intermodal volume remains strong

Posted By: Tom Sanderson
Date Posted:  Friday, November 11, 2011  9:21 AM

IANA, the Intermodal Association of North America, reported continued strength in domestic intermodal shipments in September. Shipments in domestic boxes are well above the same period in 2010 and match the highpoint for 2011. Shipments moving in international containers fell off in September and remain below 2010 volumes. It is now clear we will not have a fall peak shipping season with tight capacity on the west coast.

 

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Categories: Intermodal Volume
Nov 082011

Retail sales continue to show very slow growth rates

Posted By: Tom Sanderson
Date Posted:  Tuesday, November 08, 2011  6:23 PM

Seasonally adjusted real retail sales increased in September to $174.3 billion. (Note that actual sales are deflated using CPI 1982-84=100.) Year-over-year growth was 3.9%, the seventh month in a row under 5%. From peak (Sep '07) to current, retail sales are off 3.4%, a much smaller percentage decline than what has occurred in the housing and auto markets. September sales were 11.3% higher than the trough (Mar '09) of the recent recession. Real retail sales have only recovered to the levels of early 2005, which is not much of a recovery. The vertical bars in the graph represent recessions.

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Categories: Retail sales and same store sales
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