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November 11 2019

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Spotlight 6 The Journal of Commerce | November 11 2019 www.joc.com Truckload carrier revenue stalls A slowdown in the US economy, especially the industrial sector, put the brakes on revenue growth at the largest publicly owned truckload carriers in the third quarter, dampening expectations for a stronger fourth-quarter finish. Operators blamed "an oversupply of truckload capacity" for greater- than-expected pressure on earnings. "We continue to expect a seasonal improvement in demand during the fourth quarter of 2019 — however, less robust than originally anticipated," Knight-Swi Transportation Holdings — the parent company of Swi Transportation, the largest US truckload carrier — said in a statement. The rationalization of truckload capacity "has accelerated," the company said. However, that won't bring much relief until "the second half of 2020," according to the Phoenix, Arizona-based company. In the third quarter, Knight-Swi's total revenue dropped 10.8 percent year over year to $1.2 billion, while trucking revenue, excluding fuel surcharges and transactions involving Knight-Swi subsidiaries, fell 6.4 percent to $876.4 million. "We also experienced increased competition in the intermodal market, which led to a 10.3 percent reduction in volume and 6.8 percent less revenue per load year over year," Knight-Swi said. The gap between truckload spot rates and intermodal spot rates has widened since May, as truckload spot rates rose and intermodal rates plateaued. Knight-Swi's net profit fell 30 percent to $74.6 million. Trucking operating income declined 22 percent to $109.4 million, giving the segment an operating ratio of 88.9, up from 86.9 percent a year ago. The trucking segment's adjusted operating ratio rose from 84.9 percent in the year-ago quarter to 87.5 percent in the third quarter. Few trucking businesses have escaped the grind of slower US economic growth. The US real GDP expansion rate slowed from 3.1 percent in the first quarter to 1.9 percent in the third quarter, according to an initial estimate from the Commerce Department. Lagging industrial output, an underlying indicator for truck freight volumes, is one reason for the deceleration. "Soer demand, driven by slowing production in the U.S. manufacturing sector, and more readily available capacity drove Landstar's truck rates and volumes below prior year levels in the 2019 third quarter," Landstar president and CEO Jim Gattoni said. The fourth-largest US truckload operator's revenue was down 16 percent year over year to $1 billion in the third quarter, mostly due to a 5 percent decrease in truck loadings and a 13 percent decrease in revenue per load. Truck transportation revenue was down 17 percent to $932.2 million. Landstar's intermodal rail revenue dropped 16 percent to $29 million. The 5 percent decrease in truckload volumes was "a larger decrease than the low single-digit decrease anticipated," Gattoni said. He didn't see much room for improvement in the fourth quarter. "Through the first few weeks of October, the number of loads hauled via truck was below the corresponding period of 2018 in a high single-digit percentage range," he said. No buildout to cheaper rents The new supply of United States industrial real estate scheduled for delivery in the coming months is projected to exceed demand by about 70 million square feet, the first time in nine years that new supply will exceed demand. But this will not undermine rent growth and absorption rates in key distribution markets, according to commercial real estate services firm Cushman & Wakefield. That's because 44 percent of the 10 million square feet of industrial space under construction throughout the country is concentrated in seven growing markets: Dallas-Fort Worth, Southern California's Inland Empire, Pennsylvania's I-81 and I-78 corridors, Chicago, Houston, Atlanta, and Indianapolis, the company said in its Marketbeat–US Industrial Q 3 2019 report. "Considering these markets also account for more than 50 percent of net absorption in 2019, new supply remains largely concentrated in markets where demand has been consistently strong," the report stated. The key Executive Editor, The Journal of Commerce and JOC Events: Chris Brooks 609 649 2181, chris.brooks@ihsmarkit.com Executive Editor, The Journal of Commerce and JOC.com: Mark Szakonyi 202 872 1234, mark.szakonyi@ihsmarkit.com Managing Editor: Benjamin Meyer 916 716 6272, benjamin.meyer@ihsmarkit.com Associate Managing Editor: Kevin Saville, 212 488 4282, kevin.saville@ihsmarkit.com. Senior Editors: William B. Cassidy Trucking and Domestic Transportation 202 872 1228, bill.cassidy@ihsmarkit.com Bill Mongelluzzo West Coast 562 428 5999, bill.mongelluzzo@ihsmarkit.com Hugh Morley Northeast, Mexico 646 679 3475, hugh.morley@ihsmarkit.com Eric Johnson Technology 213 444 9326, eric.johnson@ihsmarkit.com Janet Nodar Breakbulk and Heavy Li 251 473 2742, janet.nodar@ihsmarkit.com Greg Knowler Europe +44 7976798770, greg.knowler@ihsmarkit.com Turloch Mooney Global Ports +852 9011 9109, turloch.mooney@ihsmarkit.com Associate Editor: Ari Ashe Southeast Ports, Intermodal Rail 202 548 7895, ari.ashe@ihsmarkit.com Data Analyst: Marcin Lejk +44 587416270, marcin.lejk@ihsmarkit.com Shipper Engagement Manager: Dustin Braden 646 679 3450, dustin.braden@ihsmarkit.com Senior Content Editor: Alessandra Gregory Barrett, 860 248 5238 alessandra.barrett@ihsmarkit.com Senior Designer: Sue Abt, 862 371 3534, sue.abt@ihsmarkit.com Designer: Bryan Boyd, 908 910 7849, bryan.boyd@ihsmarkit.com Publisher: Tony Stein, 770 295 8809, tony.stein@ihsmarkit.com Sales: Cindy Cronin, Senior Strategic Account Manager Southeast, Gulf, Canada sales, 954 260 6061 Jean Gibbons, Senior Sales Executive West Coast, Midwest sales, 706 469 7160 John Knowles, Senior Sales Executive Europe sales, +44 7779974677 Allyson Marek, Senior Sales Executive Northeast sales, 862 754 8012 Alex Remstein, Associate Sales Specialist Reprints/Classifieds/Copyrights, 646 679 3418 Mehdi Smaili, Senior Sales Executive, Asia sales, +44 7581406491 For Magazine Subscription Customer Service: www.joc.com/help 450 West 33rd St., 5th Floor, New York, N.Y. 10001 800 952 3839 Vice President, Maritime & Trade, IHS Markit, Peter Tirschwell Executive Director, Media & Events, Maritime & Trade, IHS Markit, Amy Middlebrook Manager, Production, Carmen Verenna Product Manager, JOC, Jesse Case ©2019 The Journal of Commerce — All Rights Reserved For more information, visit our website, www.joc.com. 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