Echo Global Logistics’ (NASDAQ: ECHO) second-quarter results and management commentary confirmed our basic view of the trucking market, which is that tighter capacity has made markets more sensitive, and strong volume growth is pushing spot rates up. Positive revenue guidance for Q3 was another strong signal of a fundamentals-driven recovery in trucking markets.

 

In this piece, we consider what recent information from public company earnings tells us about where we are in the cycle, then closely examine Echo management commentary. Finally, we dive a bit deeper into brokerage margins.

 

Echo said that current July trends have diverged from normal seasonal patterns, which is consistent with our view that we’re at the beginning of a major inflection point and the beginning of another inflationary cycle in trucking.

 

In May and June, volumes and prices increased, while margins compressed on a year-over-year basis. We note that while J.B. Hunt said contract rates are already moving, Echo management hasn’t seen that yet and thinks spot volumes need to grow before contract rate increases happen.

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