2015 net income up 76% at USA Truck, fourth quarter income beats estimates

The once troubled USA Truck has pulled together two consecutive years of growth, with full year 2015 net income reaching $11.069 million, up 76.1% compared to 2014 net income. Fourth quarter net income of 39 cents per share blew past the consensus estimate of 23 cents.

Full year revenue at the Van Buren-based trucking and logistics company was $507.934 million, almost 16% lower than the $602.477 million in 2014. The company released its fourth quarter and full year earnings report Tuesday (Feb. 2) prior to the market open.

Fourth quarter net income was $3.937 million, better than the $3.552 million and more than the consensus estimate of the three analysts who follow the company. Fourth quarter revenue was $117.984 million, below the $150.072 million in the 2014 fourth quarter and below the consensus estimate of $130.22 million.

“Our fourth-quarter results reflect the progress we have made improving profitability in our Trucking operations. The many initiatives we implemented to reenergize our Trucking turnaround, combined with Trucking’s strengthened leadership and the refreshing of our fleet, have enabled us to accelerate the progress underway,” USA Truck Board Vice Chairman Tom Glaser said in the report.

Fiscal 2014 saw the company end five consecutive years of losses. The 2014 net income of $6.285 million was a more than $15 million swing from the $9.11 million loss in 2013.

Trucking division operating income was $11.088 million for the year, a wide swing from an operating income loss of $3.122 million in 2014. Trucking division revenue during the year was $354.48 million, below the $423.495 million during 2014.

A factor in reduced revenue during the year was a reduction in the average number of in-service trucks. That average in 2015 was 1,970, below the 2,202 in 2014. Helping improve margins and improve income despite a revenue reduction was base revenue per loaded mile of $1.885, better than the $1.788 in 2014.

Revenue and operating income at Strategic Capacity Solutions (SCS) fell in 2015. Company officials have said they want to grow this “asset light” side of the business to diversify its revenue base. Operating revenue for the year totaled $153.454 million, well below the $178.982 million in 2014. Operating income in the division in 2015 was $11.983 million, well below the $20.775 million in 2014. However, the operating ratio in the segment improved in 2015 to 91.5% from 86.9% in 2014.

The USA Truck Board of Directors approved the repurchase of 2 million shares of company stock, a common move among publicly held companies to boost share value and remain attractive to the investor community.

Tuesday’s earnings report is the first for newly hired CEO Randy Rogers, who has more than 20 years experience in global logistics, including railroad operations. His first day on the job was Jan. 14.

“The progress made in such a short period in our Trucking business under our new leadership team is impressive and I look forward to working closely with them to generate further improvements,” Rogers said in the earnings statement. “Furthermore, I believe our asset light business is built on a strong, scalable platform and I am excited about the opportunity to leverage my experience in logistics as we position our asset light business strategically to accelerate significant growth and to further position USA Truck as a leading capacity solutions provider.”

Glaser, the former chief operations officer of USA Truck who was named to the company’s Board of Directors in 2014, served as CEO between July and January when former CEO John Simone resigned following a cancer diagnosis.

2016 OPTIMISM
USA Truck does not offer guidance on future quarters, but Stephens Inc. transportation industry analyst Brad Delco and associate Scott Schoenhaus believe the truckload sector will do well in 2016.

“Looking ahead, we believe there are reasons to be optimistic about truckload stock performance in 2016, despite a weaker macro environment, which has been pressured by a soft manufacturing backdrop and with elevated inventory levels that will need to be worked through on the retail side,” Delco noted in the Jan. 7 investor note.

The Stephens Inc. note also suggested that new federal electronic log rules will be a benefit to the trucking industry – even with the change a few years away.

“On December 18, 2017, the entire truckload industry will be required to use Electronic Logging Devices. We believe the impact to the industry will be very positive as it 1) improves safety on our nations’ highways, 2) levels the competitive playing field for all carriers and 3) eliminates non-compliant capacity. We believe the net effect will be reduced capacity, higher rates (i.e. pricing), higher driver wages, and increased industry consolidation.”

2016 PESSIMISM
Not everyone is optimistic about 2016.

The American Trucking Associations’ Truck Tonnage Index was up 1% in December following a 0.9% dip in November. For all of 2015, the seasonally adjusted tonnage was up 2.6% compared to 2014. The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 132.7 in December, 2.9% above the previous month.

“Tonnage ended 2015 on a strong note, but it was not strong for the year as a whole,” ATA Chief Economist Bob Costello noted in his report. “With year-over-year gains averaging just 1.2% over the last four months, there was a clear deceleration in truck tonnage.”

Costello reiterated his concern about high inventory levels.

“At the expense of sounding like a broken record, I remain concerned about the high level of inventories throughout the supply chain. The total business inventory-to-sales record is at the highest level in over a decade, excluding the Great Recession period. This will have a negative impact on truck freight volumes over the next few months at least. And, this inventory cycle is overriding any strength from consumer spending and housing at the moment.”

The Cass Freight Index showed shipments in December were down 3.7% compared to December 2014 and down 4.9% from November. Shipment costs were down 5.2% compared to December 2014 and down 2.7% compared to November.

Rosalyn Wilson, a supply chain expert and senior business analyst with Pasadena, Calif.-based Parsons, who provides economic analysis for the Cass Freight Index, said the national shipping industry in 2015 was not as robust as it was in 2014.

“The declines are not unusual for December, but they capped off a second quarter of
decline. In retrospect, 2015 did not even begin to reach the heights we reached in 2014,” Wilson said in her report.

Wilson said issues that caused declines in 2015 are not likely to abate in early 2016.

“With manufacturing slowing, inventories high, companies rationalizing employees and a six‐month slide in freight volume and expenditures, 2016 will get off to a slow start,” she noted.

USA Truck shares (NASDAQ: USAK) closed Monday at $16.43. During the past 52 weeks the share price has ranged from a $32.14 high to a $11.58 low.