uploads///SWFT Refrigerated

Understanding the Impact of Customer Losses on Swift Transportation’s Refrigerated Segment


Jun. 10 2016, Updated 11:07 a.m. ET

Refrigerated segment insights

Swift Transportation’s (SWFT) Refrigerated segment is a kind of combination of the Truckload and Dedicated segment. However, the Refrigerated segment requires the use of specialized equipment, unlike the Truckload segment. The average operational truck count in this segment declined by 220 trucks, or by 11.8%, in 2Q16 to date, as compared to the same period last year.

Due to right sizing of its fleet, SWFT has seen its Refrigerated loaded miles per truck rise by 11.4% in 2Q16, as compared to the corresponding period in 2015. But overall volumes expressed in total loaded miles declined by 1.7%.

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SWFT lost two large accounts in Refrigerated in 1Q16, and the company expects this to impact its revenues for the remainder of 2016. Refrigerated revenues per loaded mile have declined by 4% in 2Q16 as of June 7. This decline has mainly been due to change in business mix, which in turn, has increased SWFT’s length of haul and pricing pressure.

Refrigerated’s contribution

Through the Refrigerated segment, SWFT caters to customers requiring freight to be carried in temperature-controlled trailers. These shipments consist of one-way movements over irregular routes and devoted truck operations. The segment contributes typically 8%–10% of the company’s total operating revenues.

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The truckload environment

Line-haul rates, which also act as a standard of per-mile truckload, declined in March and April 2016, and truckload companies don’t expect conditions to improve any time soon. As of mid-May 2016, the Cass Truckload Linehaul Index exhibited a 2.3% fall on a YoY (year-over-year) basis. This index hit a reading of 123 after its fall in March 2016, reflecting its lowest level since May 2015.

According to Avondale Partners, these figures of the Cass Truckload Linehaul Index pose a downside risk to the 2016 forecasted pricing gain of 1%–2% for truckers. All these developments could create serious pressure on the bottom lines of trucking companies in the months to come.


SWFT’s EPS (earnings per share) was $1.49 in 2015. For the current year, analysts are estimating EPS of $1.43 for the company, which would mean an anticipated drop of 3.6%. Below is a breakdown of YoY EPS fluctuations for SWFT’s peers, according to analyst expectations for 2016.

  • Knight Transportation (KNX)—drop of 13.5%
  • Heartland Express (HTLD)—drop of 8.6%
  • B. Hunt Transportation Services (JBHT)—rise of 10.6%
  • Werner Enterprises (WERN)—drop of 8.2%

Notably, the SPDR S&P Transportation ETF (XTN) has the highest ETF exposure (2.3%) to SWFT, and major trucking companies make up 22.5% of XTN’s portfolio.

Continue to the next part for a look at Swift’s Intermodal segment.


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