Two intermodal trucking companies see revenue increases, but lower intermodal volumes

RELATED TOPICS: INTERMODAL | FINANCIALS | SHIPPERS
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Hub Group is viewing its intermodal business as a glass half-full, while Schneider sees theirs as half-empty, based on second-quarter results the companies released last week and comments made in investors’ conference calls.

Both companies provide services in intermodal, trucking, and supply chain management.

Hub Group and Schneider saw intermodal revenue increases despite lower volumes. Both experienced railroad lane closures, weather disruptions, and more intense truck competition.

Despite second quarter problems, Schneider last week announced new intermodal service at its BNSF Railway ramp in Barstow, Calif.

Hub Group, with 1% more revenue on a 7% volume decrease, cited a soft freight market and increased intermodal competition, but its officials expressed optimism.

“The good news is that the volume declines have flattened,” says David P. Yeager, Hub Group CEO, “And we expect to continue to see sequential improvement through the second half of the year.”

“I just heard the June results of [the Index of] Consumer Sentiment was through the roof again,” Yeager says. “And consumers drive an awful lot of this economy.”

Despite a 12% revenue increase on volume growth of 2%, officials with Schneider were not as optimistic.

“It’s a little murky from our standpoint what the whole trade discord is going to deliver in the second half of the year,” says Schneider CEO Mark Rourke. “Intermodal is more influenced by Asian and international imports than the rest of our business.”

Despite uncertainties, Schneider announced its new intermodal service out of Barstow is aimed at shippers in southeastern California, Las Vegas, and western Arizona.

Besides pricing, five-day transit times from Barstow to Chicago are designed to be competitive with trucks, officials say.

“San Bernardino has experienced a lot of growth in recent years, creating capacity issues for shippers in the region,” says Jim Filter, who heads Schneider’s intermodal division.

In the wake of growing applications of Precision Scheduled Railroading, Rourke says Schneider is talking with railroads about increasing intermodal capacity.

“I think we’re seeing a bit more dialogue with some of the railroads relative to finding ways that they can certainly achieve their objectives that they’re going after on running an effective railroad but also looking for those areas where additional volume may be able to be secured on the train,” he says.

Hub Group is pleased with rail service it is receiving.

“Rail service has improved dramatically,” says Yeager. While Union Pacific’s performance showed substantial improvement, Norfolk Southern’s was at “record levels,” he says.

Another major intermodal player, J.B. Hunt, earlier in July cited similar intermodal problems as those of Hub Group and Schneider, noting that lane cancellations in the East stemmed from applications of PSR.

Like Hub Group, Hunt officials expressed optimism for intermodal in the second half of 2019 and have given modest praise to railroad performance.

As of July 30, intermodal volume was described as “weak,” down by 2.5% from the previous year, according to Rick LaGore, writing for InTek Freight and Logistics.

Overall second quarter intermodal was down by 8%, says Terri Pizzuto, Hub Group’s chief financial officer.

Excess truck capacity resulted in lower truckload rates, which eroded intermodal’s competitive price advantage, prompting shippers to switch from intermodal to truckload, Hub Group officials say.

Hub Group announced net income of $29.2 million on second quarter revenues of $921.2 million.

Schneider’s net income was $49.2 million from revenues of $1.2 billion and the company announced it will close its “final mile” business of making consumer and business deliveries of furniture, carpet, and appliances.
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