Q4 earnings season — Part 2: The upcycle can last well into 2021, executives say

As we mentioned in our Part 1 update: “Rates are soaring across all modes. Revenue and profits are rising. So is the cost of purchased transportation, though, for freight brokers and IMCs. Tight capacity and congestion represent both problems and opportunities, driving rates higher but limiting volume potential.“ 

This view was confirmed after listening to the majority of transportation earnings calls this season.

This week we bring you updates on six companies across a diverse array of transportation modes in an effort to provide a high-level, comprehensive view of the market: UPS (parcels), C.H. Robinson (freight brokerage/forwarding), Landstar (brokerage), Prologis (transportation and logistics-related real estate), Marten (reefer) and Schneider (truckload and intermodal).

Common themes that emerged were: sizable revenue and earnings beats, strong guidance (where given), and commentary for 2021 and a broad consensus that the upcycle in transportation can last well into 2021. Nearly all executives we heard from said they believe that the cycle has legs and that they are not seeing any worrisome signs or data indicating an imminent slowdown. Additionally, all companies see no fast or easy fix to the undersupply of drivers relative to demand. Landstar’s business capacity owner (BCO) count, however, does suggest that capacity is rushing in to take advantage of attractive market conditions, which bears careful watching. Lastly, and perhaps surprisingly, both UPS and Prologis believe that e-commerce as a percentage of overall retail spending can hold its elevated penetration rate and market share even after vaccines are widely distributed in the second half of 2021. The outlook is considerably cloudier and more difficult to forecast in the second half of 2021, but the first-half outlook remains rosy.