• ITVI.USA
    13,683.230
    2,931.500
    27.3%
  • OTLT.USA
    2.949
    -0.056
    -1.9%
  • OTRI.USA
    19.680
    -0.650
    -3.2%
  • OTVI.USA
    13,646.340
    2,945.470
    27.5%
  • TSTOPVRPM.ATLPHL
    2.960
    0.380
    14.7%
  • TSTOPVRPM.CHIATL
    3.710
    0.160
    4.5%
  • TSTOPVRPM.DALLAX
    1.290
    -0.010
    -0.8%
  • TSTOPVRPM.LAXDAL
    3.720
    0.010
    0.3%
  • TSTOPVRPM.PHLCHI
    2.240
    0.100
    4.7%
  • TSTOPVRPM.LAXSEA
    4.160
    0.060
    1.5%
  • WAIT.USA
    132.000
    -5.000
    -3.6%
  • ITVI.USA
    13,683.230
    2,931.500
    27.3%
  • OTLT.USA
    2.949
    -0.056
    -1.9%
  • OTRI.USA
    19.680
    -0.650
    -3.2%
  • OTVI.USA
    13,646.340
    2,945.470
    27.5%
  • TSTOPVRPM.ATLPHL
    2.960
    0.380
    14.7%
  • TSTOPVRPM.CHIATL
    3.710
    0.160
    4.5%
  • TSTOPVRPM.DALLAX
    1.290
    -0.010
    -0.8%
  • TSTOPVRPM.LAXDAL
    3.720
    0.010
    0.3%
  • TSTOPVRPM.PHLCHI
    2.240
    0.100
    4.7%
  • TSTOPVRPM.LAXSEA
    4.160
    0.060
    1.5%
  • WAIT.USA
    132.000
    -5.000
    -3.6%
Company earningsIntermodalLogisticsNewsTop StoriesTrucking

Universal Logistics seeks expense relief from customers

2022 guidance calls for improvement but still reflects chaotic supply chain

Launch costs associated with a new business win at an auto manufacturer’s facility pulled down Universal Logistics Holdings’ third-quarter results.

The Warren, Michigan-based asset-light transportation and logistics provider recorded a $7.1 million loss on the new piece of business in the period, which in part pushed earnings per share 24% lower year-over-year to 38 cents, well short of the 64-cent-consensus estimate.

In total, $12.9 million in startup and litigation costs weighed on Universal’s (NASDAQ: ULH) operating income line, which was 24% lower year-over-year at $16.7 million even though revenue increased by 22% to $446 million. The net result was a 36-cent hit to EPS.

Universal’s key performance indicators – consolidated

“The ongoing chip shortage and supply chain disruptions hampered North American automotive production throughout the quarter which, in turn, adversely impacted our contract logistics businesses,” CEO Tim Phillips stated in a press release.

Launch costs humble contract logistics unit

The startup costs landed in the contract logistics segment, which reported a 48% year-over-year decline in operating income even though revenue was up 23%. The segment’s 3.8% operating margin was 530 basis points lower than the year-ago quarter with 460 bps of the reduction tied to the contract.

Universal’s key performance indicators – contract logistics

While weakness throughout the auto manufacturing complex continues to limit results, management remains hopeful.

“We continue to remain bullish on autos and Class 8 truck demand in 2022 but there is no end in sight to the current headwinds the industry is facing,” Phillips commented on a call with analysts Friday.

Universal has placed 1,000 workers in the new facility and in the trucks supporting it. It has incurred the full labor run rate for the site even though it is operating at only 60% capacity. Roughly $5 million of the loss in the quarter was associated with a revenue shortfall and increased labor expenses with another $2 million in charges tied to downtime and errors made during the launch.

The impact was seen in value-added service revenue per employee, which was down 7% year-over-year.

Universal is talking with the company to remediate terms and address wage inflation.

“We won’t let this particular opportunity weigh the organization down for an extended period of time,” Phillips added. “We want to get this done expeditiously and if we can’t, then we need to figure out a way that we can both as partners find a transition strategy for the business.”

Universal is also asking its other customers to help on the wage line. Management said that while the major auto and Class 8 truck manufacturing facilities it services have seen limited production or intermittent shutdowns, most contracts are performing.

Congestion, costs hamper intermodal

The company’s intermodal segment saw a 13% year-over-year decline in loads due to “unprecedented congestion at the ports and rails, as well as a shortage of labor and available equipment,” Phillips stated.

He noted that most of the headwinds to Universal’s intermodal business have been tied to Southern California’s ports. He said the rush of freight landing in the ports pushed accessorial charges (detention, demurrage and storage) more than two times higher in the quarter and that it will need to address the incremental charges with its customers.

Intermodal revenue was up 28% in the period to $121 million as revenue per load excluding fuel surcharges increased by 21%. However, network congestion and $5.8 million in ongoing litigation charges (a 480-bp hit to margin) dropped the operating margin to 1.6%, 780 bps lower year-over-year.

Universal’s key performance indicators – intermodal

Universal’s trucking operations recorded 29% revenue growth at $107 million with margin improvement of 60 bps at 6.4%

The company-managed brokerage segment continued to cull out less desirable freight and reprice the book of business. Revenue was flat year-over-year at $59 million. Loads were off 17% but revenue per load increased by 19%. The division reversed a loss from a year ago, posting a $1.8 million profit (3% operating margin).

Universal plans to reprice 40% of its brokerage business during the fourth quarter.

Universal’s key performance indicators – trucking and brokerage

2022 guidance looking up

The company is guiding fourth-quarter revenue to be in a range of $400 million to $425 million, a 7% year-over-year increase at the midpoint of the range, with a consolidated operating margin between 4% and 6%, lower than the 6.1% recorded in the fourth quarter of 2020.

Full-year 2022 guidance calls for revenue between $1.8 billion and $1.9 billion, a 9% increase from implied revenue in 2021 and ahead of the current consensus estimate of $1.77 billion. The 2022 consolidated operating margin is forecast between 7% and 9%, which is ahead of the 5.9% margin expected for 2021.

Click for more FreightWaves articles by Todd Maiden.

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.

One Comment

Leave a Reply

Your email address will not be published. Required fields are marked *

We are glad you’re enjoying the content

Sign up for a free FreightWaves account today for unlimited access to all of our latest content

By signing in for the first time, I give consent for FreightWaves to send me event updates and news. I can unsubscribe from these emails at any time. For more information please see our Privacy Policy.