When you are accustomed to growth in the mid-double digits, 9 percent can seem rather anemic. That’s about how much revenues grew in 2006 for the CCJ Top 250 – the nation’s leading for-hire carriers in terms of revenues, fleet size and employment. It’s far below the increases of 16.1 percent and 14 percent in 2005 and 2004, respectively.
Yes, for most, the wild, wonderful ride appears to have ended for now. But trucking executives should put the recent past into perspective. For one thing, some of the CCJ Top 250 revenue surge in 2004 and 2005 stemmed from consolidation rather than organic growth, and from one-time events such as the expansion of package-delivery firm DHL Express in the U.S. market. In 2006, there was less merger activity involving major trucking companies.
But you don’t have to discount recent gains to appreciate the relative strength of 2006. Historically, 9 percent growth would have been seen as quite strong for the CCJ Top 100, the predecessor for the CCJ Top 250. Since deregulation in 1980, the Top 100 had surpassed a 9 percent year-over-year increase only four times – 1984, 1994, 1996 and 1999. And besides, slower growth is still growth – and it came on top of a strong year.
Still, 2006 results point to the relative softness trucking companies are experiencing today. For example, the number of power units operated by the CCJ Top 250 rose by more than 10 percent in 2006 – a bit higher than the increase in revenues. In 2005, however, the double-digit revenue growth came at the same time that the number of trucks and tractors actually declined by 2.6 percent.
Shifts in the makeup of the CCJ Top 250 due to consolidation, changes in carrier reporting and other factors can skew year-over-year comparisons somewhat. But the basic message remains that 2005 was a year of tight capacity and strong freight, helping to drive higher pricing. And clearly, capacity wasn’t as tight in 2006. Changes in driver employment reinforce this point. While the driver force – company drivers and owner-operators – declined in 2005 by 2 percent, it surged 11.9 percent in 2006. So revenue growth in 2005 seems to have been driven mostly by pricing, while the slower 2006 growth seems to be driven mostly by volume.
Trucking companies constrained by a driver shortage and other factors may have taken the opportunity in 2006 to load up on pre-2007 trucks and hire more readily available drivers – just as the freight demand that had driven strong revenues and profits in recent years was softening. The result would be a swing from tight capacity to overcapacity. If that’s the case, however, the effect seems to have been relatively mild so far.
Despite some sluggishness in freight and little sign of near-term improvements in the troubled housing sector, there are few indications of a downturn bearing any resemblance to the bloodletting of 2000 through 2002. Among the publicly traded carriers, for example, the results are mixed – last month, some reported lower second-quarter profits, while others saw higher earnings than a year ago.
