Earnings

Trucking For The Long Payments Haul

No longer just a job for convoys alone, a number of firms are entering the freight fray, with logistics and card payments the big beneficiaries.

No longer just a job for convoys alone, a number of firms are entering the freight fray, with logistics and card payments the big beneficiaries.

Trucking. It’s an industry that has legs. Or wheels. Or is pulling its weight no matter the size of the load.

Regardless of which tired analogy you use, freight is anything but tired. Amid intranational trade, international trade and even short-haul activity, fleet activity is logging growth, and the industry is ripe for competition. Some of the biggest names in retail and eCommerce are investing where the rubber meets the road, with positive implications for payments and other tech companies.

The key to some of the newer tech initiatives remains cost savings, and autonomous vehicles are looming, along with AI, intended to cut down on inefficient route management and, of course, staffing/driver costs.

In the latest salvo of the health of the industry, two payment card giants reported earnings, with a strong dose of optimism about the road ahead. Last week, FleetCor said earnings per share for the fourth quarter was $1.90, outpacing the $1.72 seen by The Street. The negative impact from fuel spreads should abate somewhat, alleviating pressure on fuel cards (at more than half of the top line), and organic growth in this segment should be 10 percent moving into 2017, driven in part by the firm’s Mastercard business.

And yesterday (Feb. 13), WEX reported results that showed the average number of vehicles serviced stood at 10.5 million, up 10 percent year over year in the fourth quarter. Looking at the Fleet Solutions Business, WEX said that, in total, the segment saw revenues up 41 percent year over year to $192 million, with a boost from the EFS acquisition that closed this past year and organic volume trends. Drilling down a bit into the business, the payment processing revenue logged by the firm was up a bit more than the volume of vehicles serviced, up 13 percent to $81.7 million.

Management said on the call that the momentum from 2016 has carried over into 2017, with, among other initiatives, an agreement with Enterprise Fleet Management in Canada, with fuel locations already gained through the EFS deal, and fleet business wins via Cox Communications, KLLM and Ford Air, among others.

Management also said the international fleet operations are performing well. CEO Melissa Smith told analysts that positive pricing power persists in fleets domestically and internationally.

All in, WEX’s earnings per share of $1.28 beat The Street by two pennies, with revenues at $290.8 million beating estimates by almost $11 million.

But what lies down the road for trucking itself — as in manning and managing the fleets themselves — may be a bit hazy and fraught with twists and turns. Firms like WEX and FleetCor benefit from the razor and razor blade model, where it’s transactions that matter, at the pump and elsewhere, while expense management can always garner attention, especially in leaner economic times.

Others are getting into the trucking game, and you might even recognize a name or two. No less a retail juggernaut than Amazon is looking to launch, as early as this summer, an app-based service that brings shipping firms together with truck drivers, with a nod toward Uber. That latter company, known for ride-hailing services, is also getting into the game with its own app titled Uber Freight, which helps eliminate the middleman as well and offers freight pricing. As for shippers themselves, how could they stay still? FedEx has said that it is mulling the idea of deploying smaller fleets to make deliveries with automated vehicles no less. The firm has partnered up with several automakers in preparation of adopting automated deliveries.

And within the U.S., as consumer spending continues to be resilient and business hiring also grows, movement of goods continues apace. The 10-year forecast put forth towards the end of 2016 by the American Trucking Association sees volumes moved by trucking up 27 percent cumulatively through the next decade.

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