Second-quarter trucking conditions were on full display in the quarterly earnings of Marten Transport, released late Thursday.
The Truckload segment, which represents the nondedicated over-the-road activities of the company, was relatively busy, recording a slight increase in total miles driven, up almost 3%. Nonrevenue miles driven were down 80 basis points, which is a positive. Average miles per trip rose to 528 from 505.
And yet the Truckload segment net of fuel surcharges produced an operating ratio of 98.8% compared to 90.6% in the second quarter of 2023.
That’s because despite the fact that miles driven increased slightly, revenue net of fuel in truckload dropped to $96 million from $101.3 million a year ago. Average revenue per tractor per week net of fuel declined to $4,093 from $4,472 a year ago.
That contrast was a mini-summary of the way things went for Marten (NASDAQ: MRTN) as a whole in the second quarter. Its total operating revenue, including fuel, of $246.2 million was down 13.8% from the second quarter of last year. (Depending on how the average is calculated, the Department of Energy/Energy Information Administration average retail diesel price was about $3.84 in the second quarter of this year and $3.91 last year, so the difference should not have had an enormous impact on fuel surcharge revenues, all other things being equal.)
But operating income was down 64.6%, to just under $10 million from $28.2 million a year ago.
The overall OR for Marten net of fuel was 95.3% compared to 88.7% a year ago.
The drop in OR came even as Marten is holding the line on expenses. Every significant expense line item during the quarter was less than that of a year ago. Total expenses were $236.2 million compared to $257.5 million a year ago.
The contrast between the second quarter of 2023 and 2024 for Marten comes in more than the bottom-line numbers. Last year, in releasing its quarterly earnings, Marten Executive Chairman Randolph Marten said in a news release, “While the soft freight market demand, excess capacity and inflationary costs continue to put considerable pressure on industry pricing, volumes and margins, we recorded our second-highest second quarter operating revenue and net income in our history.” (Marten does not hold a conference call with analysts.)
This year, Randolph Marten said the company’s earnings “were heavily pressured by the freight market recession’s oversupply and weak demand, inflationary operating costs, and cumulative impact of freight rate reductions leading to freight network disruptions.”
But the chairman reiterated a statement he made with the release of the company’s first-quarter earnings as well: “We have not agreed to rate reductions since last August.”
“We are focused on minimizing the freight market’s impact on our operations while investing in and positioning our operations to capitalize on profitable organic growth opportunities, with fair compensation for our premium services, across each of our business operations for what comes next in the freight cycle as the market moves toward equilibrium from its current recessionary late stages,” Randolph Marten said in the second-quarter earnings report.
The refusal to implement any rate reductions was likely a contributor to the significant drop in miles driven by the Dedicated division, where such a policy is likely to have its biggest impact. While the Truckload segment reported that 3% increase in miles driven compared to a year ago, that measure in the Dedicated group was down almost 19%.
Another comparison that may show the impact of Marten’s stance on not cutting rates: Truckload has risen as a percentage of total miles driven. Truckload miles driven were 59.1% of total miles in the second quarter this year and were 53% a year ago.
In its annual 10-K report, Marten described the activities of its Truckload segment as providing short-haul to medium-to-long-haul service. It includes both refrigerated and dry van trucking, and contracts are “typically” for one year.
There also was a significant drop in the number of loads handled by Marten’s Intermodal division. They were down 28.8%, to 4,464 from 6,267. OR in the segment crossed the break-even 100% mark, coming in at 103.4%.
Reaction on Friday to the Marten earnings was slightly negative. At approximately 10:05 a.m., the company’s stock was down 4.13% to $17.17 on a day when the S&P 500 was slightly positive. In the past year, Marten stock is down about 20.5%.
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