Trucking Boom Is Hitting the Brakes as Freight Demand Slows

Rates are sliding and shipping demand and capacity appear to be coming into balance following a period of strong earnings for trucking companies

Prices for last-minute spot loads in the truckload market are sinking as shipping demand comes closer into balance with available truck capacity.

Photo: Chip Somodevilla/Getty Images

The strong freight demand that has delivered bumper earnings for trucking companies during the pandemic appears to be waning, as inflation and sagging consumer sentiment slow an inventory restocking rush that has swamped distribution networks.

Rates on trucking’s spot market are sliding and analysts have started to downgrade companies in the sector as truckers prepare to report first-quarter earnings in a market that is signaling growing economic uncertainty.

The Cass Freight Index measure of domestic shipping demand edged up a bare 0.6% in March from the year before and up 2.7% from February, an unseasonable slow growth rate at the end of the quarter. Freight-payment company Cass Information Systems Inc. said in an analysis of its closely watched index that the freight market is clearly in a slowdown.

At the same time, freight rates appear to be pulling back from recent historic highs. Prices for last-minute spot loads in the truckload market, which make up a fraction of the market but tend to lead trends in contract rates, are sinking as shipping demand comes closer into balance with available truck capacity. Dry van truckload spot rates excluding fuel surcharges are down 37% since December and 27% in the past month, according to Bank of America Corp.香蕉视频苹果下载 analysts.

香蕉视频苹果下载“I think it’s fair to say that the days of expecting rate increases are pretty much over,” said Avery Vise, a trucking analyst at FTR Transportation Intelligence. “It’s a question of just how quickly things are going to normalize. The idea that you can just sort of print money is over.”

Bank of America’s measure of trucking capacity available to shippers jumped last week to its highest level since June 2020, while its measure of shippers’ outlook for freight rates dropped sharply to the lowest level since July 2020.

J.B. Hunt Transport Services reports first-quarter earnings next week.

Photo: Luke Sharrett/Bloomberg News

Lowell, Ark.-based J.B. Hunt Transport Services Inc., a bellwether for the U.S. freight market, will kick off the sector’s earnings next week with its first report since the carrier, which has a range of truckload, dedicated shipping services and intermodal operations, counted $760.8 million in net profit in 2021, including $242.2 million in earnings in a booming fourth quarter.

The country’s biggest truckload carrier, Knight-Swift Transportation Holdings Inc., which reports earnings April 20, saw revenue skyrocket 28.3% last year, to almost $6 billion, including a 42% gain in revenue in the fourth quarter that generated a $254.6 million net profit.

香蕉视频苹果下载The profits capped a surge in gains for truckers during the pandemic, as a sharp increase in consumer demand and a rush by retailers to restock depleted store shelves jammed freight networks and sent prices spiraling upward.

Now, some shippers that had signed expensive contracts as they scrambled for scarce capacity are setting those deals aside to look for lower rates in a shifting market, said Jeff Tucker, chief executive of Haddonfield, N.J.-based freight broker Tucker Company Worldwide Inc.

香蕉视频苹果下载Transport for trucking’s biggest operators remains in high demand, but “is it going to be as exciting as the last couple of years going forward? Maybe not,” said Mr. Tucker.

Every day, millions of sailors, truck drivers, longshoremen, warehouse workers and delivery drivers keep mountains of goods moving into stores and homes to meet consumers’ increasing expectations of convenience. But this complex movement of goods underpinning the global economy is far more vulnerable than many imagined. Photo illustration: Adele Morgan

Less-than-truckload carrier A. Duie Pyle is seeing inflation cut into the consumer trade香蕉视频苹果下载 that feeds a big share of trucking demand, said John Luciani, chief operating officer for LTL Solutions at the company. The West Chester, Pa.-based carrier’s first quarter was “lackluster” compared with last year’s robust growth, he said, with volumes growing by single digits year-over-year rather than the double-digit rate the company expected.

Freight transportation stocks have been turning downward香蕉视频苹果下载 as signs of a slowdown emerge.

The Dow Jones Transportation Average, which tracks 20 large U.S. companies including trucking giants J.B. Hunt and Ryder System Inc.,香蕉视频苹果下载 is down about 11% from a March 29 high, compared with a 4% decline in the S&P 500 over the same period.

Bank of America analysts recently downgraded transportation stocks including truckers Werner Enterprises Inc., Schneider National Inc., Saia Inc., TFI International Inc. and ArcBest Corp. citing “deteriorating demand outlooks and rapidly falling freight rates.”

Jason Seidl, a transportation analyst at investment bank Cowen Inc.,香蕉视频苹果下载 said headwinds from the impact of inflation and of the Russia-Ukraine war will present challenges for carriers following a strong growth period. “I think the overall tone for earnings coming up on the trucking side is going to be a hefty dose of reality from the last month,” said Mr. Seidl.

Write to Lydia O’Neal at lydia.oneal@wsj.com

Corrections & Amplifications
The Cass Freight Index measure of domestic shipping demand edged up 0.6% in March from the year before and up 2.7% from February. An earlier version of this article incorrectly said the index rose 0.6% from February. (Corrected on April 18)

香蕉视频苹果下载Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the April 14, 2022, print edition as 'Trucking Boom Hits the Brakes.'