Paving Trucking's Short- and Long-Term Roads
It's been a bumpy ride for freight carriers, but we think a few truckers are wisely planning for the future.
The trucking industry hit a number of major potholes in 2009. The struggles of the United States economy caused freight volumes to plummet at the end of 2008, resulting in significant overcapacity and intense pressure on trucking rates. In our last trucking Stock Strategist, we discussed the major obstacles that carriers were facing: Weak demand and excess capacity, which lead to intense competition. These factors remain in today's environment, but volumes appear to be recovering, which may help tighten the market and eventually boost pricing. It's difficult to pinpoint when the market will reach equilibrium, but we will describe a few short-term trends to give our take on where the industry is headed. We will also share insights from company visits, highlighting a few approaches carriers are taking to prepare for the future.
Volumes Improving, but Weak Pricing Makes for a Bumpy Short-Term Lane
Truckers started 2009 on a steep downhill slope, because the American Trucking Association's seasonally adjusted For-Hire Truck Tonnage Index plunged 7.8% sequentially (12.5% year-over-year) during December 2008--the largest month-over-month decline since April 1994. Year-over-year declines remained in the 10%-13% range through the first half of 2009, but lessened during the back half of the year. Based on the ATA data and carriers' results, we estimate that volumes bottomed sometime around the end of the summer of 2009. The index ended the year on a strong note, as December tonnage increased 1.3% sequentially and recorded a 1.2% increase from 2008 levels--the first growth since September of 2008. For the full year of 2009, the tonnage index finished down 8.7% from 2008 levels.
Anthony Dayrit has a position in the following securities mentioned above: CNW, HTLD, JBHT, KNX. Find out about Morningstar’s editorial policies.