As higher costs make a dent in financial performances, fleets reveal varied strategies.
Knight-Swift Transportation's (CCJ Top 250, No. 4) revenue fell 3.5% at $1.86 billion, while net income was reported at $69.5 million, which CEO Adam Miller said was due to soft freight rates and inflation, as well as U.S. Xpress integration costs.
The carrier has restructured U.S. Xpress’ network to focus on shorter hauls, aiming for higher profits. Miller told investors during the Knight-Swift earnings call that the company’s revamped network of 11 locations has increased rates and boosted revenue per mile, improving driver home time by increasing route density.
“That’s really changed the type of freight we’re hauling, the length of haul, and the rate per mile,” Miller said.
However, Miller also added that the company faced challenges with rising insurance expenses, even as overall insurance and claims costs declined year-over-year in Q4.
Knight-Swift CFO Andrew Hess emphasized the company's focus on utilizing U.S. Xpress to scale operations. Its strategy includes bringing market rates up as the market allows, increasing its seated truck count and building its dedicated fleet.
“This is a business that’s operating well,” Hess said. “We believe it has opportunity for growth, and so we’re going to see that grow as well.”
The company also plans to build its safety culture, which Hess said would give a “real advantage in cost.” It also plans to switch high-cost equipment leases with more favorable price purchased equipment.
[Related: Insurance costs on the rise for carriers]
Meanwhile, J.B. Hunt's (No. 3) revenue decreased 5% at $3.15 billion, while net income was reported at $155.5 million, which CFO John Kuhlow said was weighted by “the deflationary rate environment coupled with an inflationary cost environment.”
The carrier also saw its salaries, wages and employee benefits rise to $812 million from $807 million a year ago, while insurance claims expenses was at $86 million. In a call with analysts, Kuhlow said they expect ongoing rising costs due to inflation.
“Despite two consecutive years of record safety performance, our insurance premiums have more than doubled over that period due to the higher cost to resolve claims,” Kuhlow said. “This is an industry challenge, and these inflationary costs will need to be passed on to shippers and eventually consumers.”
As for Covenant (No. 36), its revenue was up 1.2% in Q4 at $277.3 million, while net income dipped to $6.7 million compared to the $12.7 million from Q4 2023. Profitability fell short of expectations in the dedicated segment, which President Paul Bunn said was due to greater-than-anticipated temporary customer shutdowns and volume reductions driven by internal operational issues, Hurricane Helene in the Southeast and the impact of mid-week holidays.
Higher costs were also a headwind. The truckload carrier’s salaries, wages and related expenses increased year-over-year by 13 cents, or approximately 10%, on a per total mile basis, driven largely by growth in its dedicated protein supply chain business.
In a call with analysts, Bunn noted that growing the dedicated fleet in niche services requires hiring and retaining skilled drivers for specialized equipment, leading to higher per-mile costs due to shorter hauls.
Additionally, insurance and claims expense also increased approximately 11% on a per total mile basis compared to the prior year, impacted by a large current-period claim.
Going forward, Bunn said Covenant plans to focus on its strategy of growing its dedicated business, which is expected to yield new contracts and revenue growth. However, startup costs with new contracts and a lackluster poultry production forecast for 2025 may impact the segment during the near term.
