Companies struggled with operating ratios in Q3 amid sluggish demand, according to earnings reports.
Knight-Swift Transportation Holdings, P.A.M. Transportation Services and Marten Transport experienced truckload difficulties in the metric, following bountiful demand last year, as the market put further sequential strain on carriers.
“Our earnings this quarter were significantly pressured by the industry-wide weak demand, cumulative impact of reduced freight rates with the resulting freight network disruption, and inflationary operating costs within the current freight market recession,” Marten Executive Chairman Randolph Marten said in an Oct. 18 earnings release.
Truckload operating ratios for Knight-Swift and P.A.M. as well as Marten’s overall business remained above 90%. Companies are striving to lower these rates to make better use of capital, and Knight-Swift is aiming to achieve that reduction by 2026 given its acquisition of U.S. Xpress Enterprises.
Carriers' operating ratios remain high
Even when Knight-Swift excluded U.S. Xpress, its truckload operating ratio was 91.5%, CEO and President Dave Jackson noted in an Oct. 19 earnings call.
“We are just simply not comfortable with an OR that starts with a nine and our people are working with urgency to do all that we can,” Jackson said.
In other segments for Knight-Swift, adjusted operating ratios were mixed. The metric was 93.3% in logistics, 104.5% in intermodal and 84.9% in LTL, per an earnings presentation.
Operating ratios by trucking companies showed that this year, Knight-Swift’s truckload segment and Marten continue to worsen from Q1 onward, reaching their worst rates in Q3.
In contrast, P.A.M.’s worst operating ratio for truckload this year was in Q1 at 99.3%, and its best quarter for the metric was in Q2 at 92.7%.
“The third quarter of 2022 was one of the best in our company’s history while the third quarter this year was faced with an unprecedented unfavorable truckload market,” P.A.M. President and CEO Joe Vitiritto said in an Oct. 18 earnings release.
Despite the results, Vitiritto said in the statement that the company saw improvement in factors that the business believes will benefit the company when the market changes.
The persistent drag was in contrast to booming quarters last year. Knight-Swift dropped under 80% for its adjusted operating ratio in truckload last year for quarters in H1, and Marten reported its best operating ratios as a publicly traded company during that time.
