Firstly, let us state the obvious – Q1 numbers are not good. Reading the dismal data is frightening, and as there are no signs of the global pandemic slowing down, it is safe to assume Q2 data won’t be great either.
The U.S. Department of Commerce further confirmed the fact that Q1 was devastating for the country, as it reports a -4.8% GDP, which is the lowest reading after the recession of 2008 and 2009. It also marks the first GDP decline since 2014.
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The Damage to the Economy
-4,8% GDP drop might prove detrimental for the whole U.S. economy. For reference, the drop in 2008-2009 was at around -8%, so if the pandemic keeps ravaging the economy for a bit longer, we might face the same consequences that the economy endured more than a decade ago.
Every industry reports dismal numbers, and even though the trucking industry has been doing better than others in Q1 as compared to other less fortunate industries, experts fear that Q2 will be the quarter where the industry will take a huge hit.
The Decrease in Demand
As the pandemic started to affect the country back at the beginning of Q1, many businesses temporarily closed their doors, which resulted in less demand for trucking services. However, trucking companies did not close, which resulted in a surge in the supply of trucking services and a drop in the demand for them.
Following the drastic increase in unemployment rates in April, jumping to a whopping 14.7% from 4.4% in March, people are likely to be more cautious in making discretionary purchases fearing that the delivery might get stuck in limbo if the trucking company files for bankruptcy.
Taking into consideration that the shutdown took only two weeks from March spells ominous predictions for Q2.
Q1 Reports from Trucking Companies
Below are the Q1 reports from major trucking companies:
J.B. Hunt Q1 Earnings
J.B. Hunt reported $2.28 billion in revenue, with an increase of 9% for Q1 2020. Their operating income is reported at $155 million, which is down 8% compared to Q1 2019, and their EPS (earning per share) is $0,98, as compared to the $1,09 for Q1 2019.
Old Dominion Freight Line Q1 Earnings
Old Dominion Freight Line reported a 0.3% decrease in Q1 2020 as compared to Q1 2019. They reported an EPS of $1.11, which is an increase compared to Q1 2019.
Knight-Swift Q1 Earnings
Knight-Swift reports a 6.6% increase in revenue in Q1 2020 as compared to Q1 2019. The operating income has increased by 12.2%, and the EPS increased by 20.0%.
Landstar Q1 Earnings
Landstar reports a $40.9 million net income in Q1 2020, as compared to $63.3 million in Q1 2019, and EPS of $1.04, as compared to the $1.58% in 2019.
The Q1 U.S. Bank Freight Payment Index
The U.S. Bank Freight Payment Index (which is a report launched in 2017 that shows data on freight shipping volumes and spend on a regional and national basis) confirmed the already known.
The U.S. Bank’s official report stated “The U.S. Bank Freight Payment Index indicates that both shipments and spend contracted from Q4 2019. Despite strong movement of consumer goods in March, it was not enough to balance out the market sectors impacted by shutdowns, such as restaurants and auto factories. Shipments were down 1.8% and spending dropped 3.7%, both from the previous quarter. As shippers and carriers approach the second quarter, we anticipate that both indicators could continue to contract.”
This report works on a National Shipment Index, which is data based on the actual transaction payment date, highest-volume domestic freight modes of truckload and less-than-truckload. It goes under seasonal and calendar adjustments to correct the data reporting.
The NSI for Q1 is at 124.5, which is a 1.8% drop to Q4 2019. This marks the first decline since 2016.
The report’s author, ATA (the American Trucking Association) Chief Economist Bob Costello argues that the binge buying of non-perishable goods led to a shortage not because of a shortage of goods in stores, but because of the fact that the supply chain couldn’t keep up with it.
ATA also expects the industry to take a hit in Q2, and they expect the rebound in customer confidence to take a while as well.