The first quarter of the year is typically a time of wider gross margins for freight brokerages as new contract awards come online but spot rates stay relatively low on weak seasonal demand. It’s different this time, though – a full year of weak rates has made shippers more aggressive, even though carriers have little left to give.
That meant that across the industry, we saw freight brokerage margins compress in the first quarter of 2020 compared to the year prior. This happened at C.H. Robinson, which fought hard and priced aggressively to grow revenues in a soft environment, and it looks to be the case at XPO Logistics, which reported Q1 results yesterday.
XPO’s North America freight brokerage business saw gross revenues contract by 5.3% year-over-year to $586 million – clearly, there was only so much margin Jacobs & co. were willing to sacrifice to hold on to volume. Margins compressed by 300 basis points year-over-year to 17.5%, resulting in an 18.8% hit to net revenues, which fell to $103 million for Q1.
Uber reports its earnings on Thursday, May 7, and we’ll see whether Uber Freight was able to recover from a disappointing Q4 2019, when gross revenues fell quarter-on-quarter for the first time. Significant growth from Uber Freight would come in the face of what we can only imagine is a dramatically higher cash burn rate at the overall company, given collapsing Rides demand.
You have selected content that's only available to members of FreightWaves Passport. As a member, you gain immediate access to the most in-depth and informative freight research available. It's your gateway to continuing education.
Members also get:
Access to exclusive community dedicated to discussing the most important challenges facing freight.
Monthly and Quarterly Freight Market reports keeping you informed of industry trends.
Much, much more!
Click below to learn more and sign up today!
Existing Passport subscribers may log in using the form below.
John Paul conducts research on multimodal freight markets and holds a Ph.D. in English literature from the University of Michigan. Prior to building a research team at FreightWaves, JP spent two years on the editorial side covering trucking markets, freight brokerage, and M&A.