• ITVI.USA
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    -0.080
    -0.3%
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    -528.180
    -4.2%
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    -0.150
    -4.6%
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  • ITVI.USA
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  • OTRI.USA
    27.850
    -0.080
    -0.3%
  • OTVI.USA
    12,070.710
    -528.180
    -4.2%
  • TLT.USA
    3.080
    -0.150
    -4.6%
  • TSTOPVRPM.ATLPHL
    2.890
    0.260
    9.9%
  • TSTOPVRPM.CHIATL
    2.930
    -0.150
    -4.9%
  • TSTOPVRPM.DALLAX
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    0.100
    8.5%
  • TSTOPVRPM.LAXDAL
    3.000
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    -6.5%
  • TSTOPVRPM.PHLCHI
    1.750
    0.120
    7.4%
  • TSTOPVRPM.LAXSEA
    3.280
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  • WAIT.USA
    126.000
    5.000
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BusinessCompany earningsDriver issuesFinanceNewsTruckingTruckload

U.S. Xpress has strong second quarter

U.S. Xpress turned in strong second quarter earnings, with its closely watched operating ratio (OR) improving both year-on-year and sequentially.

The truckload carrier’s GAAP operating ratio of 96.1% was 180 basis points better than the 97.9% it recorded in the second quarter of last year. But an even bigger improvement was posted in the company’s GAAP OR over the first quarter, when USX turned in an OR of 100.8%. 

The non-GAAP adjusted OR for USX in the second quarter was 95.9%, an improvement of 160 basis points from the second quarter of 2019. The improvement from the first quarter was even more substantial, strengthening 500 basis points – from 100.9% in the first three months of the year.

The biggest driver of the improvement at USX was operating revenue. It rose to $393.9 million from $371.1 million last year before fuel surcharges, which declined to $28.5 million from $42.6 million. Employee wages and purchased transportation were both higher, up to $139.9 million for salaries, wages and benefits from $130.5 million, and up to $117.3 million from $112.5 million for purchased transportation. But overall, operating expenses at $406.2 million were only slightly higher than the second quarter of 2019.

The end result was that operating income was $16.2 million, up from $8.78 million in the second quarter of 2019. Net income rose to $9.49 million from $2.67 million last year. 

Earnings of $0.18 per share, according to SeekingAlpha, beat street estimates by $0.33  per share, meaning the consensus was for a net loss. The total revenue of $422.4 million – which includes fuel surcharge revenue – was $7.7 million better than the street consensus.

The improved performance came despite downturns in some  metrics. Average revenue per tractor per week in the over the road division dropped to $3,558 from $3,625 while average revenue per mile in that segment dropped slightly to $2.351 from $2.355. But average revenue miles per tractor per week rose to 1,918 from 1,853, and the dedicated division’s performance in that metric rose to 1,753 from 1,706, But the dedicated division also saw its average revenue per tractor per week rise to $4,122 from $4,018.

In both the company’s prepared statement released with its earnings as well as his comments during the company’s call with analysts, USX CEO Eric Fuller gave much of the credit to the improvement in new digital initiatives aimed at drivers, a specific fleet that has been rolled out in stages. (For a separate article on the initiative, dubbed Variant, please go here. Fuller did not mention Variant by name in his call.)

He said the fleet of drivers armed with the company’s proprietary digital technology is “recruited, planned, dispatched and managed using artificial intelligence and digital platforms.”

The rollout of the program was into 100 trucks by the first quarter. In the recently concluded second quarter that number was up to 400. Plans for further expansion are ambitious. 

USX has plans to further roll out the program, but it isn’t the type of thing that is just given to the drivers. Given that it is a technology-driven method for determining the optimization of routes and other planning, “right now, there are many company drivers who are part of the problem,” Fuller said on the earnings call. “Part of the problem is we’ve got to go outside our fleet now to find drivers for this model. We have higher expectations. We want somebody more comfortable operating in an automated or digital environment.”

Fuller noted that the benefits from what USX calls its Digital Fleet are not necessarily visible to its customers; they aren’t being equipped with new technology. But he added that the company’s results so far are that the Digital Fleet is turning in about a 20% improvement in miles/week compared to the broader over-the-road fleet, and that the driver turnover rate in the Digital Fleet has improved at an annual rate of about 70%. Drivers are making more money and they’re sticking around, Fuller said. 

In response to an analyst question, Fuller said there may be a reduction in back office headcount as a result of the Digital Fleet, “but that is not our big focus. It is an ability to leverage technology to drive better results.”

Fuller, in commenting on the market, said spot market opportunities are “vast… we are turning down a lot of freight.” He said USX continues to try to “balance commitment” while taking advantage of a “premium market that we think will stay this way for quite a while.”

USX has long fought high driver turnover rates that Fuller said are being combated in part by the Digital Fleet. But it also gives him a perspective on driver capacity that is close to the issue. From the perspective of freight rates, it’s a bullish outlook.

Fuller said as a result of CDL school closures or cutbacks as a result of the pandemic, there have been 100,000 fewer new CDLs issued than at this time last year. Combine that with restrictions on driver movement as a result of the federal drug and alcohol clearinghouse and “we think it is likely there could be 150,000 to 200,000 drivers that come out of the market within this calendar year,” Fuller said. “That is a pretty significant piece.”

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.

One Comment

  1. So much excitement about the higher utilization for the digital fleet, and yet the revenue per truck for the overall fleet has actually gone down?

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