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Truckload carriers’ forecasts cut heading into Q1 prints

Analysts take 20%-plus out of EPS projections

The latest round of earnings revisions may not be the "last cut," one analyst says. (Photo: Jim Allen/FreightWaves)

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.

Chart: (SONAR: NTIL.USA). The National Truckload Index (linehaul only – NTIL) is based on an average of booked spot dry van loads from 250,000 lanes. The NTIL is a seven-day moving average of linehaul spot rates excluding fuel. To learn more about FreightWaves SONAR, click here.
Chart: (SONAR: OTRI.USA). A proxy for truck capacity, the Outbound Tender Reject Index, shows the number of loads being rejected by carriers. Carriers are currently rejecting less than 4% of all loads tendered under contract compared to cycle highs of more than 25%.

Majors said this is unlikely to be the “last cut” for TL earnings estimates this cycle as “hopium will undoubtedly linger into 2Q earnings in July.” He said the industry has been in a “relatively seasonal holding pattern” since mid-2023, which he expects will remain in place in the near term. However, as earnings estimates reset lower following first-quarter reports, essentially removing further downside risk to numbers, he expects investors to “shift to a more bullish posture.”

Duetsche Bank (NYSE: DB) analyst Amit Mehrotra cut TL estimates by roughly 20% on average a week ago, saying he expects disappointing results from “most transactional/commoditized companies” like TL and “as the retail complex remains skittish on restocking and the truck market is stubbornly oversupplied.”

But he thinks the next move in inventory levels could be positive.

“To be sure, retailers still appear highly hesitant on restocking, but the trajectory of sales in the context of the destock that’s occurred should be positive for inventory balances and in turn freight flows.”

Both analysts said they favor less-than-truckload carriers and the railroads due to “their pricing power and oligopolistic industry structures,” stressed Majors.

Mehrotra raised first-quarter estimates on some of the railroads he follows but trimmed estimates on all LTL carriers except for Saia (NASDAQ: SAIA), which he kept at $3.50 following a favorable intraquarter update.

Majors slightly raised his LTL estimates for the first quarter on Friday, with XPO (NYSE: XPO) getting the largest increase at 4%. XPO issued a positive update on the quarter earlier this month. Majors’ estimate for Saia is also $3.50.

“We continue to see outsized earnings risk from asset-based carriers and brokers exposed to the annual contractual pricing cycle relative to LTL and rails,” Majors said.

J.B. Hunt kicks off transportation’s first-quarter earnings season in earnest on Apr. 16.

More FreightWaves articles by Todd Maiden


  1. James Bauman dba Kirplopus MC 895097

    Just did another Dollar General load. 3/4 of the inbound trucks were “spot” line me. Only a sprinkle of USX, Werner. I have a feeling legacy carriers’ volume is taking a hit; as businesses like this are in their own survival mode. And spot = cheaper. Wondering if mini bids happening “ dear legacy: if you want our freight you have to price = to contract.” I’d gueee yes. I think upcoming Q1 reports will be worse than bad. I got $2/ mi incl fuel for this DG load that dropped today (Fri Mar 29) 600 mi $1200.

  2. James Bauman dba Kirplopus MC 895097

    I recently did a Dollar General load; picking up a load delivering into DG (last week). I perceive that, while legacy carriers have contracts with DG, etc; these shippers are putting more freight onto cheaper spot; where I got the load. It’s not just survival of carriers like us; as we’ve seen many DG type stores are closing. IMO these types are putting addtional pressure on contracts; or, simply diverting freight to cheaper spot market as survival tactic. One can’t worry about longer term freight dynamics over mere survival. I see extreme pressure on legacy carriers’ dynamics; as the contract rates are already lower; and on top of this, the volume will be shrinking due to freight diversion to cheaper spot market. I’m only averaging about $2/mi (long miles though), inclding fuel on spot. I don’t see spot market rates falling; as they are already at bottom; where carriers like me simply stay home vs haul for anything less profitable than $2/mi incl fuel. I think the upcoming Q1 reports will be BAD.

  3. James Bauman dba Kirplopus MC 895097

    I pay to park (securely) at a large legacy carrier in Charlotte, NC. Yesterday (Sunday 24th) their drivers could not even find parking spaces; the yard was so full. I suspected lack of freight as culprit; asked one of their drivers ; and was correct. Yard looked like it was Christmas; when drivers “want” to be home. Never seen this before during non-holiday; due to absolute weakness in freight. Shocking, thrilling the survival mode ahead for carriers; both legacy & small like me.

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Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.