Trucking companies that made it through the last recession are well-positioned to make money, analysts with Avondale Partners said in a recent state-of-the-industry report.
Research analysts for Avondale said fewer trucking companies failed in the first quarter of 2012 than at other times in recent years. They also say that driver retention and compensation will help shape the future of the industry.
The Avondale Partners analysts, led by Managing Director Donald Broughton, say in their latest “failures report” that 160 companies with an average fleet size of 13 trucks went under in the first quarter of this year. That is well below the 295 companies that failed in the first quarter of 2011. The first quarter of 2012 saw 2,110 trucks leave the industry compared with 3,955 that left in the first quarter of 2011.
“Almost by definition, if a trucking company made it through the last couple of years of turmoil in the macro economy, industry marketplace and regulatory environment, it is a result of being fairly well capitalized and fairly well operated,” the analysts said.
“Or put another way, if they made it this far through the tough times, then they can make it through easier times.”
The firm also notes that today’s fleets are better positioned to handle $4 diesel than when fuel prices hit the mark and beyond in 2008.
The latest Avondale report indicates that driver retention and pay will continue to shape the future of the truckload industry.
“The ability to attract, train and retain qualified drivers will separate the winners from the losers in the trucking industry,” the analysts stated.
Capacity in the trucking industry continues to tighten, boosting rates. Capacity is the relationship between the number of available loads and the number of available trucks to haul them.
Bankruptcies are not the only factors for capacity changes. Other factors include consolidation, changes in operations, and the age of trucks in a fleet. For example, a trucking fleet that acquires another fleet of 100 trucks might retire the oldest 20. For smaller companies, perhaps an owner trades in two older models to get one truck.
Driver retention and compensation also have an effect on capacity. Avondale pointed out in 2010 that driver retention and compensation had surpassed fleet failures as a factor in the “continued tightening of truckload capacity.”
The firm also notes that regulations such as CSA and an uneven adoption of electronic on-board recorders in the industry have reduced the pool of qualified drivers for many fleets, affecting capacity.
In conclusion, Avondale Partners says investors are seeing a bull market for truckload stocks at the present time. That’s because truck rates are up and a shortage of qualified drivers for truckload carriers and other factors are keeping the supply of available trucks tight compared to the number of available loads.
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