USA Truck continues its turnaround with a strong 1st quarter

Like many other trucking companies USA Truck reported a strong year over year growth. USA Truck has a lot to celebrate this quarter considering they have covered a lot of ground in their turnaround in a relatively short period of time since the new CEO James Reed and team took over in January of last year. Their first quarter EPS hit $0.13 after reporting a $0.61 per share loss for the same period last year. Their consolidated operating revenue increased 23% YOY with an operating ratio of 97.8% compared to 106.2% in 2017.

The CEO James Reed and CFO Jason Bates reflected positively on the quarter’s results stating it was the “third consecutive quarter of positive EPS” and “only the second positive 1Q EPS in the last 11 years.”

Both the trucking and logistics segments showed solid improvement year over year with the trucking segment operating at a 100.6% from a 110.1%. The logistics segment went form a 96.7% to 92.9% with a 170-basis point improvement sequentially from the 4th quarter as well.

Their report stated the main driver of improvement in the trucking segment over last year was a 15.5% increase in base revenue per loaded mile from $1.74 to $2.009 per mile. The base revenue per available tractor per week increased 12.9% or $371 when compared to 2017 1Q. Both measures indicate better utilization and better prices.

Average unseated tractor percentage was 7.3% which was a 100 basis point improvement year over year, but experienced a increase of 170 basis points sequentially. Reed commented the driver recruiting was a big challenge in the first quarter and their target is to be under 5% in the near future.

Reed did suggest other factors such as the weather provided enough challenge to push the combined OR above 100 where it might have been below that. He stated they had 25 weather events resulting in shut downs that increased costs by disrupting the network.

Revenue per load increased 45.3% year over year and 5.8% over the 4th quarter. Reed suggested this was balanced by compressed margins as the spot market tightened over the quarter. He said, “It’s about winning the long game,” in reference to taking some lower margins in order to gain volume from shippers and win consistent accounts. He elaborates explaining, “people don’t like change,” referencing a tactic to get back in the door at places by lowering prices below competition to give the shippers a reason to switch.

Like many other players in the freight markets Reed would not commit to forecasting the market conditions for the remainder of the year, stating April had not started particularly strong. He did put focus on them being an opportunistic carrier as they were “capitalists.” Their main strategies were on rebalancing their fleet position as well as domiciling drivers in the appropriate regions. He says the “freight network is substantially more north of the I-40 corridor, but domiciles are south of I-40.”

The common theme of the call was on the long run and building the network in order to take advantage of the market when opportunities arose as he acknowledged the market is fairly unpredictable. Strategies like moving towards a two-brand fleet as this makes training and maintenance much easier were mentioned.

Another long run goal is to lower the average age of the fleet by replacing 350 to 400 tractors and move to more in-house maintenance by reopening some facilities now the network has been repositioned more strategically.

In closing Reed reiterates the idea that USA Truck is still in a phase of rebuilding and turnaround as he says, “it feels like a very young company.” He clarifies the statement stating it seems more like a company in its first few years of existence versus one in the middle of its 3rd decade.

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