P.A.M. profit up 31%, revenue down 5% in third quarter

Tontitown-based carrier P.A.M. Transportation Services Inc. posted an earnings increase but a revenue decline in the third quarter amid mixed freight demand, tighter capacity and a driver shortage.

After the markets closed Tuesday (Oct. 20), P.A.M. reported earnings rose 31% to $6 million, or $1.04 per share in the third quarter, from $4.58 million, or 79 cents per share, in the same period in 2019. Through three quarters, earnings have fallen 82% to $3.87 million, or 67 cents per share, from $21.53 million, or $3.65 per share, in the same period in 2019.

Revenue declined 5.4% to $121.94 million, from $128.99 million. Through three quarters, revenue has fallen 11.9% to $344.07 million, from $390.67 million.

Revenue per truck per week narrowly declined to $3,460, from $3,466. Total loads fell 11% to 89,435, from 101,047. Through three quarters, total loads decreased by 13.4% to 262,786, from 303,587. The average number of company trucks fell to 1,516, from 1,557. The average owner-operator trucks decreased to 358, from 527.

In the carrier’s logistics operations, total revenue increased 51.9% to $26.9 million, from $17.7 million. Through three quarters, the revenue has risen 9.9% to $63.22 million, from $57.52 million.

“Our quarterly results show marked improvement as compared to the previous quarter of this year where the company felt the full impact of revenue losses associated with the closing down of three of our top 10 customers due to COVID-19 concerns,” President Joe Vitiritto said. “With the return to operations for these customers and the general increase in nationwide economic activity, we quickly bounced back to a more normal mode of daily activity. While we aren’t satisfied with these results, they are an indication of a strong model that will only require modest adjustments to attain our updated profitability improvement goals.”

Vitiritto noted that economic improvement contributed to tight truckload capacity. This allowed the company to recover the rate declines the company had in the first few months of the pandemic.

“The page has now been turned and with shippers facing upward rate pressure, we continue to have the momentum necessary to significantly improve our rate structure as we move into the final quarter of 2020 and expect this upward pressure to continue well into next year,” Vitiritto added. “A significant portion of our rates in place during the third quarter stemmed from previous contractual commitments made with shippers who will be subject to market rate adjustments as we progress through the fourth quarter of 2020 and early into next year.”

A company-wide cost analysis has led to savings that started in the previous quarter and is expected to continue through this year and into next year, Vitiritto said. The company has increased its profitability goals to a level where recent operating results come closer to the “worst-case scenario end of the range,” he explained. However, cost increases related to driver pay and insurance will not be avoidable. But the company is working to react faster to the market to offset the cost increases.

The COVID-19 pandemic has affected the carrier’s ability to hire enough drivers to fill its trucks. Vitiritto said social distancing guidelines have impacted the capacity of truck driving schools and led to a shortage of drivers that the company is working to resolve. The company made progress in this during the quarter, but more work is needed to reach full capacity. It’s working through the shortage by increasing recruiting efforts, training school diversification, and improved driver retention programs and rewards.

“Our Mexico cross-border business also experienced a significant spike in activity during the third quarter, and we expect to continue to grow this business unit by a combination of increased equipment allocation, expansion of the customer base and more service offerings,” Vitiritto said. “We continued to increase our roster of international drivers throughout the third quarter and have already set in motion a fourth-quarter equipment allocation plan in order to add to that roster.”

Vitiritto said the carrier’s logistics division had a strong recovery at the end of the second quarter and business was strong through the third quarter in its domestic and international business units. The division achieved record quarterly revenue and near-record operating income in the third quarter.

“We remain enthusiastic about our quick recovery, and the prospect of entering the final quarter of the year with positive momentum on the rate front, along with an improved cost structure, provides a high level of confidence that we can achieve our profitability objectives,” Vitiritto said.

Shares of P.A.M. (NASDAQ: PTSI) closed Tuesday at $44.70, up $2.48 or 5.87%. In the past 52 weeks, the stock has ranged between $66.39 and $22.

TRUCK TONNAGE RISES
The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index rose 6.7% in September, from August. However, the index declined 2.7% in September, from the same month in 2019, and this was the sixth consecutive year-over-year decline in the index.

“September had a nice recovery after a significant decline in August,” ATA Chief Economist Bob Costello said. “The truck freight market continues to be bifurcated, with strength in retail and home construction, but some continued weakness in industrial freight. During the third quarter, truck tonnage increased 2.4% over the second quarter but fell 5.3% from a year earlier.”