Marten Transport reported improved earnings for the third quarter but most of it came from an unusual place: its brokerage division.
In a quarter in which truckload carriers Heartland Express (NASDAQ: HTLD) and P.A.M. Transport (NASDAQ: PTSI) both reported operating ratios less than 80%, the truckload OR at Marten (NASDAQ: MRTN) improved just slightly, to 88.3% from 88.7% in the third quarter of 2020. Its dedicated division did significantly worse, declining to 89.6% from 85.9% a year ago.
And in a historically bullish trucking market, truckload revenue net of fuel was up only $1.8 million to $86.9 million, a 2.1% gain from last year’s third quarter. Revenue at dedicated net of fuel declined 0.3% to $68.8 million.
But revenue in the brokerage segment came close to doubling. It climbed $20.6 million to $42.7 million, a 93.7% gain from the $22 million recorded last year. The OR in the group improved to 87.2% from 93.1%.
And with the dedicated unit posting a drop in operating income of $2.5 million, and truckload up just $1.1 million and intermodal up $1.53 million, it means that the brokerage group’s increase in net income of $3.93 million accounted for about 96% of the total Marten increase in operating income of just over $4 million.
Propelled by the jump in the brokerage division, Marten’s operating revenue rose to just under $251.3 million from $216 million in the third quarter of 2020. That is an increase of 16.3%. The operating revenue came in about $13.8 million more than consensus, according to Seeking Alpha.
Total revenue was also positively affected by Marten’s intermodal division. Revenue there net of fuel rose 13.6% to $22.7 million, a gain of $2.72 million.
But the $4 million gain in total operating income against a more than $35 million increase in revenue — a figure that includes fuel surcharge revenue — came as Marten faced numerous cost headwinds. Operating expenses for the quarter rose to $222.78 million from $191.6 million. That is a jump of 16.2%, almost matching the percentage increase in operating revenue.
Salaries and wages climbed to $81 million, up 8%. Purchased transportation rose more than 42% to $52.86 million. Fuel expenses rose to $33.9 million, a jump of almost 40%, though that would be roughly 90% offset in the company’s net income by fuel surcharge income.
Out on the road, Marten had a quarter that at first glance would not appear to be that of a major truckload carrier in a hot freight market. Net of fuel surcharges, truckload revenue was up just 2.1%, to $86.88 million, a gain of $1.81 million. The dedicated group’s revenue declined 0.3% to $68.82 million.
The metrics on the volume of freight pulled by Marten also showed some softening, though revenue net fuel per tractor per week rose. That important metric climbed to $4,411 from $3,955, a jump of 11.5%. But average miles per trip in the truckload segment dropped to 502 from 546, and the total miles driven by the segment declined to 35.9 million from 41.2 million, a drop of 12.8%.
Average tractors in the truckload segment declined to 1,499 from 1,637, down 8.4%. In the dedicated unit, it declined to 1,523 from 1,593.
Although dedicated’s financial performance declined from a year ago, several of its metrics were improved. Average miles per trip rose to 328 from 304, average revenue net of fuel per tractor per week was up to $3,438 from $3,295, but total miles softened to 31.5 million from 33.8 million.
The overall figures at Marten were good, helped by the brokerage division. The operating revenue figure of $251.3 million for the third quarter was a record, up 16.3%. But that number includes fuel surcharges; without those charges, the rise in operating revenue was 12.8%.
And the bottom line was strong as well. Net income of $21.27 million was up 17.9% from the third quarter of last year. Earnings per share of 26 cents were up 4 cents from a year ago, and according to Seeking Alpha, was 1 cent more than consensus forecasts.
But the increase in net income of roughly $3.27 million does not match the almost $4 million increase in the brokerage division’s operating income, emphasizing just how important brokerage was to Marten’s performance during the quarter.
The company paid a special 50 cents per share dividend earlier in the quarter. That would not affect earnings, but it would have impacted its cash holdings for the quarter. Those remained strong, with cash at the end of the quarter at $83.9 million compared to $66.1 million at the close of 2020. The overall balance sheet is up to $903.38 million from $831.63 million at the end of last year.
Marten does not hold a call with analysts. In its prepared statement, it made no reference to any unit’s specific performance, including brokerage. “Marten’s talented and dedicated people continue to drive our consistent profitable growth,” Executive Chairman Randolph Marten said in the statement. “This quarter is yet another quarter over the last year and a half during the pandemic where we produced strong operating income improvement.”
One strong number in the statement that isn’t in the financial tables: the size of its workforce. Chairman Marten said the company started the fourth quarter with 181 more drivers than at the beginning of the third quarter.
He also said the number of refrigerated trailers at the company rose by 53 during the quarter. That fleet now stands at 607.
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