Gains in revenue per mile were partially offset by rising driver costs during the third quarter, but USA Truck was able to post its first positive quarter for the year with net income of $409,000, a good swing from the $734,000 loss during the same quarter of 2016.
The Van Buren-based trucking and logistics company posted third quarter revenue of $114.235 million, better than the $105.458 million in the same quarter of 2016. The earnings report was posted Thursday (Nov. 2) after the equity markets closed.
Revenue for the first three quarters of 2017 is $323.263 million, just below the $325.964 million during the same period in 2016. The company lost $7.561 million during the first three quarters, more than the $2.878 million loss during the same period of 2016.
President and CEO James Reed said the third quarter reflects the “beginning stages” of a turnaround for the company.
“We believe these results show that we are capable of making and keeping our commitments to progress. I personally thank the whole team at USA Truck for their shared commitment to these results,” Reed said in the earnings statement. “We expect to improve results through disciplined network management and pricing, enhanced partnership with customers, and improved execution in our day-to-day operations, in conjunction with our ongoing safety initiatives. While we are pleased to report positive net income, it is important for all of us to recognize that the turnaround is still in its beginning stages and our expectations are for further improvement throughout 2018.”
Key improvements in the company’s trucking sector came largely courtesy of national industry trends that have boosted spot market rates.
“The spot market is red hot and is finally providing some much needed levitation on the contract pricing front,” noted a recent industry update by a Stifel transportation and logistics analysts.
Over the next cycle of contract negotiations, prices are expected to rise between 5% and 10%, up from the previous estimate of 1.5% to 2.5%, and in 2019, prices are projected to rise 1.5% to 2.5%. according to Stifel.
The base revenue per seated tractor per week for USA Truck was $3,127 during the third quarter, a gain over the $2,997 during the same quarter of 2016 and above the $3,074 average during the first three quarters of 2017.
USAT Logistics continues to post gains for the company. Revenue during the quarter was $37.785 million, better than the $32.091 million during the same quarter of 2016. Operating income in the segment was $2.998 million, almost double the $1.547 million during the 2016 quarter. Operating revenue during the first three quarters reached $104.988 million, just above the $101.391 million in the same period of 2016. Operating income for the first three quarters totaled $5.604 million, down slightly from the $5.729 million in the same period of 2016.
“USAT Logistics saw higher quarterly volumes when compared to the same period last year, driven primarily by increased spot market freight due to favorable movement in industry demand relative to capacity. While this market dynamic has been a positive one for USAT Logistics, we remain committed to our plan of building strong long-term customer relationships through superior service and competitive pricing,” the company noted in the earnings report.
Filling trucks with drivers continues to be a challenge for USA Truck. The average number of seated tractors during the quarter was 1,628, down from the 1,648 during the same quarter in 2016. The company had an average of 1,742 in-service trucks during both quarters.
“The driver market continues to be challenging, and remains a significant area of emphasis throughout the organization,” the company noted.
Brad Delco, trucking/transportation analyst for Little Rock-based Stephens Inc., recently said the driver shortage and resulting need to boost driver wages could lower earnings for trucking companies.
“Our concern in the near-term rests on the extent of the driver shortage that will likely put wage pressure on (near term) results, in addition to keeping truck seats empty,” Delco noted in an investor report.
Delco said he’s heard “that the current driver shortage is the worst it’s been in the past 25 years” and might get worse “as drivers pursue alternative jobs related to hurricane rebuilding efforts that are higher paying and do not require them to be away from home.”
USA Truck shares (NASDAQ: USAK) closed Thursday at $14.43, up 4 cents. During the past 52 weeks, the thinly-traded shares have ranged between $14.89 and $5.73.