Fourth-quarter 2024 earnings reports from leading trucking and logistics companies revealed muted demand amid a challenging freight backdrop. However, a theme of cautious optimism emerged, with many executives anticipating low-to-mid-single-digit increases in volume and mid-to-double-digit rate increases for 2025.
Here are some key points that arose in earnings calls, based on transcripts provided by Bloomberg:
Margins remain under pressure
A predominant theme across the earnings calls was dissatisfaction with margins, which remain under pressure and below historical levels due to higher costs of capital, inflationary pressures, and declining freight rates. Companies are deploying strategic initiatives such as improving asset productivity, capital allocation, pricing strategies, and freight mix to improve margins.
Technology is set to drive operational efficiency
Companies are leveraging emerging technologies such as generative artificial intelligence (AI) and machine learning to improve service, pricing, and costs. Generative AI can automate orders and enhance the quality of pricing. Many company executives mentioned focusing on strategies designed to capture the right freight at the right prices, with an emphasis on quality of volume over quantity. Dynamic pricing, supported by technology, can help improve on execution and optimize gross profit.
Carrier attrition continues
While the freight market still has more capacity than supply, executives are seeing carrier attrition move into better balance. Increases in freight rates during Q4 appear largely due to declines in capacity as opposed to increased volume, which remains muted due to the lack of industrial production demand. Executives noted customer inventories appear adequate, with no significant change in customer demand during the quarter. Several executives highlighted early signs of industrial end market improvement. The Institute for Supply Management’s manufacturing index also underscored that point as it entered expansion territory for the first time in 26 months in January with a reading of 50.9.
Freight rates are expected to rise
Executives noted that customers appear more receptive to rate increases than they have been the past couple years, with companies generally expecting to achieve improved pricing year-over-year. With capacity leaving the market and freight volumes expected to increase, freight rates are expected to rise over the course of 2025.
What to watch for
Look for spot and contractual rates to rebound as the truckload market finds a better equilibrium helping truckload carriers rebound after two consecutive years of declining earnings. Truck utilization rates may rise to as high as 95% as capacity continues to exit the market and low-single-digit demand growth materializes. Demand could be poised for further growth if the Trump administration’s more pro-business stance spurs additional freight demand.
As more capacity leaves the spot market, spurring excess inventory for sellers of used equipment, look for equipment gains to continue to be a headwind for earnings in 2025. Structural issues plaguing driver supply could also return. A higher interest rate environment will continue to pressure margins, and equipment costs could rise as emissions standards come into focus later in the year. Further expansionary readings of the ISM manufacturing index would provide greater evidence for tonnage growth. The next reading of the index will be important to understand the impact the administration’s recent trade policy announcements around tariffs may have had on industrial production and new orders – key components of the ISM.
