P.A.M. Transport profits surge 97% in first half of 2015

Tontitown-based P.A.M. Transport is off to the races through the first two quarters of 2015 with net profits of $12.408 million, up nearly 97% from the same period last year, according to their earnings report released Thursday (July 23). Net earnings per share for the two quarters totaled $1.66 per share, compared to 78 cents earned a year ago.

CEO Daniel Cushman attributed the stellar year thus far to improved rates related to tighter capacity across the industry and higher profit margins.

The company’s top line revenue, including fuel surcharges, rose 2.6% to $207.516 million through the first half of 2015, up compared to $202.163 million in the first half of 2014. Fuel surcharges were $12.88 million lower this year over last. Also, operational costs have trended lower in 2015 from lower salaries and benefit costs, reduced insurance claims and decreased rent and purchase transportation costs.

Total expenses in the first half 2015 were $186.487 million, down from $190.728 million a year ago. Operating income rose to $21.028 million, compared to $11.434 million a year ago.

RECORD QUARTER
A record second quarter helped to buoy P.A.M.’s earnings, according to Cushman. P.A.M. Transportation reported net income of $7.039 million, or diluted earnings per share of 94 cents a year for the quarter ending June 30, up compared to 62 cents per share a year ago.

Operating revenues, including revenue from fuel surcharges, were $108.033 million for the second quarter of 2015 compared to $104.343 million for the second quarter of 2014.

“We are extremely pleased to announce another quarter of record-breaking earnings results. The second quarter of 2015 represents the best quarter in the company’s history in terms of operating profit, net income, and earnings per share,” Cushman said.

The earnings per share represents a 113% increase as compared to the same period last year and represents the company’s highest single quarter of earnings per share on the heels of a record first quarter, Cushman added.

He said second quarter revenue grew 13% year-over-year when excluding the impact of lower fuel surcharges.

The stellar quarter did not come as a surprise to Stephens Inc. analysts who have predicted strong numbers from truckload carriers in the recent quarter. Earlier this month the analysts said  “truckload carriers had plenty of demand to fill trucks in the second quarter albeit premium freight opportunities such as paid deadhead miles were not as prevalent as last year.” Stephens said its expects contractual pricing is trending up 4% to 6% and will drive second quarter earnings higher across the sector.

“We continue to place emphasis on top-line revenue growth. … The level of freight demand experienced this year continues to allow us to be more selective in choosing the business that most favorably fits our model and our rate expectations. Our Logistics division goal for 2015 is to double the revenue of 2014 and we are currently on pace to exceed that goal while also staying ahead of our profitability goals for that division,” Cushman said in the report.

He said the company’s efforts to diversify its automotive division, Mexican division and dedicated division is going as planned and each are performing as expected.

“We believe that our continued growth hinges on our ability to provide our drivers with opportunities that maximize their earnings while also allowing for their desired home time. Developing a freight base that meets these requirements continues to be a top priority,” Cushman said.

P.A.M. Transport shares (NASDAQ: PTSI) are thinly traded on the Nasdaq exchange. The share price fell 3.55% in light trading on Thursday afternoon (July 23) following the earnings release. Given the closely held stock there are no analysts that regularly cover the company. The share price has ranged from a low of $31.82 to a $67.61 high during the past 52-weeks.

On July 15, the company announced the results of its latest tender offer. The company accepted for purchase a total of 298,566 shares of its common stock, representing approximately 4% of the issued and outstanding shares, at a purchase price of $59 per share. The purchase cost was approximately $17.615 million excluding fees and expenses related to the offer.

DRIVER TURNOVER
“Despite positive driver turnover trends within certain divisions, like most of the industry, we continue to experience difficulty in attracting and retaining qualified drivers,” Cushman said.

This difficulty has required P.A.M. to make significant investments in driver recruiting and retention efforts, including increasing the number of driver recruiting personnel and expanding the number of driver training school partners.

“We also continue to review and implement changes to driver compensation plans which we have generally been able to limit any increase by using lane-by-lane analytics. However, we cannot dismiss the possibility that a more comprehensive increase in our driver pay packages may be necessary should the industry-wide driver shortage condition persist,” Cushman added.

The ongoing challenge in the driver market continues to hinder P.A.M. plans for obtaining substantial internal growth within what we consider to be a reasonably timely manner, he said.

The American Trucking Association has said there is a shortage of roughly 30,000 drivers this year. The trade association expects that number to hit 100,000 in the next three years.