We’ve already seen a number of transportation companies report third-quarter earnings results and so far what we’ve heard is in line with the first stage of an upcycle. 


In general, that means that the more sensitive a transportation company’s revenues are to cycles in the trucking spot market, the most volatile segment of surface transportation, the earlier in the cycle the company will see positive results. More stable dedicated and contracted revenues grow later, industrial volumes follow consumer volumes and intermediaries for whom spot rates are costs benefit the most as the cycle comes to an end.


Spot-exposed carriers like U.S. Xpress and Landstar saw revenues surge and operating ratios drop. Carriers with portfolios concentrated on dedicated customers improved asset utilization and guided for higher contract rates. Railroad volumes went positive year-over-year and intermodal service deteriorated across the board as the rails gained operating leverage on higher revenues growing against a flat cost base. Freight brokerages’ revenues jumped but gross margins compressed as spot rates rose faster than contracted rates.


We will stay focused on three evolving situations over the next few months: the extent to which railroads will add crews and power on a sustainable basis to restore “truck-like service” to their intermodal networks; the relative difficulty or ease with which truckload carriers recruit and retain drivers; and truckload carrier expectations for contract rate increases in 2021.

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