Freight demand fuels trucking profits

Freight demand remained very strong in this year’s second quarter, as motor carriers, ports, and even railroads continue to report record demand and – in some cases – rising profits.

The Port of Tacoma in Washington State, for example, reports that its break-bulk ocean freight volume rose 37% this year through the month of May – after increasing 28% for all of last year. On top of that, between July 6 and 7, the port handled five break-bulk vessels -- the most in a 24-hour period at the Port of Tacoma in 10 years. Several trucking operations – from LTL to TL carriers – have reported continued increases in freight volumes, contributing in many cases to increased profit projections.

Yellow Roadway Corp., for one, raised its second-quarter earnings guidance to between 85 and 90 cents per share, up from previous projections of 70 to 75 cents per share. “All our business units had a strong finish to the second quarter,” said Bill Zollars, Yellow’s chairman, president & CEO.

Yellow’s announcement follows increased projections from other major carriers, including Overnite Corp. and Old Dominion Freight Lines. Overnite boosted its second-quarter earnings projections to between 53 and 58 cents per share from 43 to 48 cents per share, while Old Dominion increased its second quarter forecast to between 38 and 40 cents per share, up from previous estimates of 33 to 36 cents per share and far above actual earnings of 27 cents per share recorded in the second quarter of 2003.

“We continue to see sustained economic growth in all regions of the country,” commented Leo Suggs, Overnite’s chairman, president & CEO.

“We are raising second-quarter earnings guidance primarily due to better volume than we anticipated [and] we are also benefiting from an improved pricing environment, which we believe reflects a strengthening economy and tighter industry capacity,” noted Earl Congdon, Old Dominion’s chairman & CEO.

Even railroads are finding themselves swamped with freight—and scrambling for a means to carry it. Union Pacific Corp. (UP), in particular, is taking additional measures to manage traffic growth on its rail network: pressing nearly 2,500 extra trainmen into service, putting nearly 700 conductors into engineer training and acquiring 500 locomotives, all in the last nine months.

“While operations did stabilize during the second quarter, record business volumes in each of the first six months of the year have made it difficult to improve service performance,” said Dick Davidson, UP’s chairman & CEO. “In fact, during the second quarter of 2004, [we] handled more carloads than in any other quarter in its history.”

He also noted that UP believes freight demand is only going to increase as the year progresses.

“Looking ahead, demand continues to increase, with the upcoming peak shipping season demand expected to be at record-breaking levels as well. [We] anticipate that volumes in the second half of 2004 will exceed last year's record levels, [with] commodity revenue growth expected to … range between 4% and 6%.”

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