Truckload carriers’ forecasts cut heading into Q1 prints
Analysts are cutting earnings estimates for truckload companies heading into first-quarter reports. Acknowledging decent demand, analysts cited an overhang of truck capacity, which is constraining pricing and margins, as the reason for the latest round of revisions.
“We exit 1Q much like we entered it for truckload-related transports — feeling okay about volumes but bad about pricing and expecting downward EPS revisions for businesses that live on this annual pricing cycle,” Susquehanna Financial Group’s Bascome Majors told clients on Monday.
He said pricing pressures alongside “steady but not spectacular volumes” will weigh on first-quarter numbers, which he cut by 26% to 32% for the TL carriers he follows. His new TL and intermodal forecasts “remain meaningfully below” consensus estimates, but his outlook for freight brokers is more in line with the averages.
Majors cut his first-quarter earnings-per-share estimate for intermodal provider J.B. Hunt (NASDAQ: JBHT) by 11% to $1.40. Management at the company said at an investor conference last month that annual price negotiations were tougher than expected. Werner Enterprises (NASDAQ: WERN) echoed the sentiment at the same event, noting a “very competitive” start to bid season for its one-way TL business.
Spot rates jumped in January as winter storms sidelined some fleets for days. The rate bump from diminished available capacity was short-lived, however, with spot rates quickly falling back to where they ended 2023. The temporary rate reprieve only impacted a small portion of large carriers’ customer books as most of the freight they haul is under annual agreements. The winter weather did leave a mark on the quarter, negatively impacting equipment utilization and driving operating costs higher.
Also, analysts have indicated that channel checks and conversations with management teams suggest March will likely be softer than expected. Shippers have toggled back to a just-in-time inventory strategy, knowing the market is loose and that should consumer buying trends suddenly indicate the need for more merchandise, trucks are readily available to quickly accommodate.
However, Schneider National (NYSE: SNDR) President and CEO Mark Rourke recently said it was somewhat encouraging to see the spot market react so sharply to inclement weather. He believes the reaction could be indicative of the amount of TL capacity that is exiting, noting similar events a year ago resulted in little to no change in spot rates.
Source: freightwaves.com
