Check Call: That lemonade stand looks rough

May 16, 2023

Welcome to Check Call, our corner of the internet for all things 3PL, freight broker and supply chain. Check Call the podcast comes out every Tuesday at 12:30 p.m. EDT. Catch up on previous episodes here. If this was forwarded to you, sign up for Check Call the newsletter here.

In this edition: Earnings season highlights, the rise in flatbed demand and Roadcheck starts Wednesday.

(Image: makeameme.org)

How’d the lemonade stand do? This earnings season was, well, brutal. It was the first quarter of the new year in a recessionary freight environment. No one really had high expectations for this quarter as the first few months of the year are never strong for most shippers. Turns out it might not have been ideal for carriers and 3PLs alike.

The carriers:

U.S. Xpress, while it is being acquired by Knight-Swift, the deal isn’t done yet. Its quarterly earnings update came with layoffs, to the tune of 150 people. The lack of freight demand is cited as the No. 1 reason for its less-than-stellar Q1 performance. The company reported an operating loss of $29.9 million and net income was a $27.1 million loss. Even enterprise carriers aren’t immune to high operating costs.

In the LTL world, Yellow came out only slightly better than others. It’s still working on a new union contract with Teamsters, but that wasn’t the main drain on resources. The infamous rebrand of “One Yellow” has had some negative effects on the balance sheet to the tune of about $4 million to $6 million. Overall, Q1 took a net loss of $54.6 million. That hurts — a lot.

In the 3PL world:

GXO, the logistics spinoff of XPO, actually came out of the gate swinging. Its first-quarter revenue set a record of $2.3 billion, a 12% year-over-year gain. Despite setting a new record in revenue, the company did fall short in net income as that came in at $25 million, which is about $12 million short of last year’s income.

C.H. Robinson performed about as well as anticipated, which wasn’t ideal. Gross profits, income from operations and diluted earnings per share were all down double-digit percentages. Shippers stuck with elevated inventory and low consumer demand were cited as the main roadblocks. The earnings per share for the quarter came in at 98 cents, which missed the mark by 3 cents. Overall, the company had revenue of $4.61 billion, which was below the target of $4.8 billion. The next quarterly call could look a little different for C.H. as the company will likely have a new CEO.

If the Q1 calls are any indication of what it expect in the second quarter, it’s gonna be a rough first half of the year.

(Image: Carthrottle.com)

Everyone’s favorite topic lately is that Mexico demand has popped up again, this time in regard to its anticipated demand in flatbed freight. According to FreightWaves’ Noi Mahoney’s article, “Cross-border flatbed trucking could prove to be the most durable segment of the trucking market in 2023.” With the rise in shippers in various industries setting up manufacturing plants in Mexico, it’s going to make for some hot flatbed demand for a while. All the buildings have to be built with materials that travel on flatbeds.

Not only is the demand for warehousing and manufacturing plants in Mexico strong, there is also still a strong demand for raw materials being imported to the U.S. from Mexico for housing here. The residential real estate market has cooled off significantly from where it was a year ago. The one thing that hasn’t cooled off is the demand for housing, leaving many U.S. real estate developers to invest in apartment complexes.

(SONAR Ticker: AGRATE)

Market Check. Memorial Day is just shy of two weeks away and that is the official start of summer. With that comes all of the amazing fruits and vegetables that make it to all the cookouts and grills across the country. Getting the produce to that party is an undertaking that those in the supply chain are quite familiar with. Based on USDA spot rates, it looks like harvest has begun its northern trek. Parts of Georgia, Tennessee and northern Arizona have begun seeing an increase in spot market rates, meaning the rest of the South will fall in line likely right around Memorial Day.

(Image: Twitter)

Reminder corner. We’re swapping out who’s with whom this week to give one final reminder that the Commercial Vehicle Safety Alliance is performing its annual roadcheck blitz across North America this week. Starting Wednesday, CVSA-certified inspectors in Canada, Mexico and the U.S. will inspect commercial motor vehicles (trucks, buses, etc.) at weight/inspection stations and other designated inspection areas.

This year’s focus is on anti-lock braking systems (ABS) and cargo securement. Now more than ever, make sure carriers are taking the time before departing a shipper to properly inspect and secure their loads, especially flatbed drivers. This should be an especially handy reminder for them as they face the highest risk if something isn’t properly secured. Remind shippers this is happening this week and if they have items that need to be moved urgently, try to give as much lead time as possible to accommodate a lengthy inspection should a driver get stopped.