Summary
There is no question that small truckload carriers and owner-operators are hurting. There is also no question that it will get worse in the short-term. In addition to soft freight demand, the small trucker is facing the softest cash flow quarter of the year, renewal of tags, increased insurance costs and they have to pay taxes soon. From where we sit, the Bear Stearns Bankruptcy Index looks conservative. What do you have to believe in order to believe that all of this is going to change and get better? Housing and/or automotive has to make some move upwards. Together, those industries generate a disproportionate amount of the tonnage in the truckload industry. It is hard to imagine a freight recovery without some leading sign of life in these areas. Given the amount of capacity that has come out of the market, a small move in housing and automotive could lead to a very quick capacity shortage and resulting rate recovery. It is just not demand, but supply as well.
Analysis
CHRW and LSTR have benefited in good times and bad. All they need is market volatility to do well, which is almost always. They are both unique and differentiated in their space. CHRW can help get a trucker home with a reasonable paying load. LSTR, on the other hand, provides the small trucker with a variable cost structure for their back office, operating authority and risk management.
HUBG has also had a solid ride due to using rail as a substitute for longhaul trucking capacity, a lower overall cost (approx. 17%) and a lower fuel surcharge. There has been softness in intermodal recently, but HUBG has done well with their own non-asset operating model.
With some exception, most asset-based truckload providers are going to have a challenging time for the forseeable future. Even when the market does recover, they will once again be facing ugly driver demographics and increasing difficulty attracting and retaining the right driver capacity.
