FreightWaves Today | October 19

Julie Van de Kamp (0:27)

I am Julie Van de Kamp, the Chief Commercial Officer at Sonar, joined by Zach Strickland today, the Head of Market Intelligence from Sonar. Thanks for being here with us.

Zach Strickland (0:36)

Yeah, I'm here on a Monday, man, getting everything warmed up for the rest of the week.

Julie Van de Kamp (0:40)

Oh, I think it's going to be a big week. We've got a great show today. We have John Tirado, the founder and president of Summa Energy, to talk about what's happening in the energy markets. Give us a little bit of an update there. And then we have Steve Logue, the General Manager for Americas at Sensolus. We're going to talk a little bit about automation and some of the cool things going on. There with their organization and then we also of course it's Earnings Week. Well, the beginning of earnings season. So we had Prologis and JB. Hunt.

That's released last week and this week tons. I'm going to look at my notes because we had such a long list.

Zach Strickland (1:12)

You read the list.

Julie Van de Kamp (1:13)

Triumph, CSX, Night Swift, Tesla, Wabi, DSV, Union Pacific, Ryder, Martin, Cass, Volvo Group, Kuhnen-Nagel. I left a lot off this list.

Zach Strickland (1:29)

Yeah, and JB. Hunt kind of set the tone.

Costs were up, revenue was up. So how much do those margins get compressed or do they get affected at all in a lot of places? Yeah.

Julie Van de Kamp (1:40)

I think the headline there is that costs ran higher than they expected and then their guidance thought obviously part of that is fuel, which will be cyclical and we'll catch up. Part of that is, I think a lot of it is driver hiring and driver wages and retention costs that were a huge headwind for them as well and then some cargo claims is what they had mentioned on their call.

I guess I'm not surprised that even in what I'm still going to call a capacity constrained freight market with so much of their business being intermodal and dedicated, those rates rise more slowly than other business units. They have less volatility, they perform well, and they're kind of your bread and butter and your staple in a depressed market or in a balanced market. They still do well. I think they both operated in the 90s, each of those business units in the very low 90s, like 91

Zach Strickland (2:38)

Yeah, all their ORs did increase though, and that's not good when you think about an OR. Again, that's costs rising faster than pretty strong revenue gains, which I think is a big takeaway for me, is that, and I know Fuel gets a lot of the headlines, and it obviously is a huge component of all that, but like you said, there's other things increasing simultaneously that I think are worth noting, because the brokerage side also stronger revenues, but margins compressed, and that is traditional in an environment where the market rates are going up quickly.

So, we still have some pretty strong volatility there.

Julie Van de Kamp (3:18)

Yeah, I mean, I guess I wasn't surprised by anything in earnings, right? It's sort of what you would expect with so much of their business being dedicated and immodal.

Revenue was up and profit was basically flat. When you look at excluding Fuel, it was up more, but it's that margin, that operating margin that fell. So, I was trying to look at if they had a number on dedicated, we knew that, that their operating income fell. Driver pay, medical claims, insurance, equipment costs, all that rose. We're seeing that everywhere. Brokerage revenue was up 57 percent.

Zach Strickland (3:56)

But their margins were tighter.

Julie Van de Kamp (3:59)

Final mile revenue fell a little bit.

Zach Strickland (4:01)

But again, I think that's just something to note when everybody's talking about rates are rising from the providers. Well, their costs are also going up.

And JB. Hunt's kind of like the poster child for the probably the broadest slice of the freight market itself. Well, Night Swift is probably a little bit broader with LTL.

Julie Van de Kamp (4:20)

But I think that and more true over the road, right? That will be telling of what's happening over the road.

Zach Strickland (4:26)

The longer haul. And I'm dedicated or not dedicated, but domestic intermodal is just crushing right now. They're taking all these volumes, but the fact that they're still seeing cost compression or margin compression there in that side is also very telling. Yeah.

Because there's almost nothing you can do about it.

Julie Van de Kamp (4:44)