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Results From The 3PLs: Strong Quarter At Echo, Forward Air Makes An Acquisition, A Detailed Market Overview From Landstar


Some highlights from Wednesday, when three leading 3PL companies released their earnings.

Echo Global Logistics

-- Most of the primary metrics for Echo Global Logistics, Inc. (NASDAQ: ECHO)  grew at a rate on either side of 25 percent: revenue up 26.6 percent compared to the corresponding quarter of 2017; truckload revenue up 28.3 percent and LTL revenue up 22.6 percent. Transactional revenue was up 27.2 percent and Managed Transportation was up 24.1 percent. Net revenue was up 28.3 percent. One key area that didn't hold that rate of growth was net income. It was up to $9.4 million from $2.4 million in the corresponding quarter of last year, almost quadrupling.

--Earnings per share of $1.63 beat consensus by 3 cts, according to SeekingAlpha.

-- In a conference call with analysts, CEO Douglas Waggoner said the market after a bang-up July—"one of our biggest months we've seen in terms of both demand and constrained capacity—"has softened a bit and spot prices have been moving downward."

--But despite that proclamation, CFO Kyle Sauers said the company was doing well as the fourth quarter kicks off. "Our October daily revenue growth has been 8 percent, which is a combination of growth in volume and revenue per load in both truckload and LTL," he said during the conference call, according to a transcript provided by SeekingAlpha. "Our gross margin through the first three weeks of October has improved slightly from the third quarter. "

--The shipments were more profitable in the third quarter compared to the prior year. Net revenue margins were up 23 basis points to 17.2 percent, with the truckload margin up 92 basis points and LTL margins down 142 basis points.

--Companies were warning during second quarter conference calls that the comparisons in the third quarter to 2017 were going to start hitting up against the strong freight market that began last year. And President and COO David Menzel, after saying that revenue per shipment was up 30 percent in July and 10 percent in September, said that decline in growth rates "is due to the comps getting tougher and spot rates escalated dramatically in September 2017." But he also said as far as pricing, "the pricing remains relatively, if not, as high as anything that we've seen on a historic level."

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Forward Air

--Forward Air Corporation (NASDAQ: FWRD), which released earnings Wednesday but has its conference call Thursday, said it had record quarterly revenue, operating income, net income, EPS, EBITDA, cash flow from operations and free cash flow. Still, its GAAP EPS of 76 cts per share was off consensus estimates by 4 cts, according to SeekingAlpha. In the company's earnings statement, CFO Michael Morris cited $1.4 million of "unexpected non-cash charges related to existing vehicular claims" as the reason for the miss.

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--The confidence of the company is enough that it said it is raising its dividend by 20 percent.

--Operating income was up less than 10 percent, so it did not grow at the same 11.1 percent rate as the rise in revenue. Tom Schmitt, Forward's CEO, said in the company's earnings statement that the gap could be attributed in part to "a tight truckload market that drove higher purchased transportation costs for all of our business "

--Forward Air took the opportunity of the earnings announcement to say it had acquired drayage company Southwest Freight Distributors for $16.25 million. Schmitt said it expects Southwest to provide $20 million in revenue and $3 million in EBITDA. Southwest will become part of the company's intermodal business that had record quarterly results, "as the team capitalized on the benefits of increased volumes and recent acquisitions," Schmitt said.

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Landstar Systems

--Records were set across the board at Landstar System, Inc. (NASDAQ: LSTR), with the its quarterly revenue a 27 percent jump over the third quarter of 2017. Records were set in net income, which was 58 percent more than in the third quarter of 2017. Gross profit---revenue less the cost of purchased transportation and commissions to agents--was a record for the third quarter, and operating income was an all time quarterly record. Its earnings call is Thursday.

--In its earnings release, CEO Jim Gattoni gave a detailed look at the fourth quarter at a level far more granular than found in most earnings releases or on their conference calls. Here are some of the highlights from Gattoni's statement:

  • "Revenue per load and the number of loads hauled via truck in the first few weeks of October continue to significantly exceed the rates and volume of the same period of 2017, however, at a more modest pace than experienced during the first three quarters of 2018. Accordingly, we expect truck revenue per load in the 2018 fourth quarter to exceed prior year fourth quarter in an upper single digit percentage range."
  • "The anticipated deceleration in the growth in truck revenue per load is the result of: 1) a more difficult quarter over prior year quarter comparison, as truck revenue per load in the 2017 fourth quarter experienced atypical significant increases on a sequential monthly basis during the quarter and 2) truck revenue per load in the first few weeks of October 2018 is trending slightly below normal seasonal patterns.
  • "The number of loads hauled via truck in the first few weeks of October is trending above the same period of 2017 in a high single digit percentage range. We expect that trend to continue and therefore expect the number of loads hauled via truck in the 2018 fourth quarter to exceed the 2017 fourth quarter in an eight to ten percent range."
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