Swift shares drop because they can't fill seats.

Well, yeah, it IS about the numbers presented to the shareholders, i.e. - the owners. What drives the numbers? Well....service. And containment of costs. The trick is finding the right balance between the two. A company that doesn't care about service is a company that will be going out of business - quickly.

Economics 101- as the demand for a product goes up and the supply becomes more constrained, the rate charged for the product goes up. Currently, companies are having a supply constraint with their number one supply input - human beings driving trucks. And this problem will only get worse. So, naturally, the rates paid to drivers will continue to increase as companies fight to recruit and maintain a limited number of drivers. The supply of transportation in the marketplace is also going to become (already is in fact in some segments) constrained due to trucking companies not being able to accept loads due to not having enough trucks. As such, shippers are going to have to start paying premium prices simply to attract transportation companies to move their product. It won't be dramatic. It won't be over night. But it IS happening.

If I were an executive with a transportation company, my top worry right now would be driver retention. I know a guy running a medium-ish (140 trucks) company who treats his drivers very well, has good equipment, and doesn't lose very many drivers and he can't recruit drivers to grow his business. Driver recruitment and retention is one of his top worries.

 

Wake up drivers! Why do these big companies claim a shortage of drivers especially Swift -yet they have the lowest pay that i can see from this forum and don't seem to want to increase it.
Gee this could be a clue of whats coming. (owned by Swift and is the only American owned trucking company in Mexico that i can tell ) http://swifttrans.com/about/details/trans-mex

 

Ideally speaking you would be correct. However large companies like Swift can survive because there competition of the same size provides the same level of shotty service for the same cheap rates. Trust me when I say customers take a back burner when it comes to cutting operating cost.

 

Journal of Commerce (JOC.com) reports a quote from Swift:
Swift Transportation, the largest U.S. truckload operator, got even bigger in the second quarter, but potential growth was restrained, the company said, by a “challenging driver market.”
“Our driver turnover and unseated truck count were higher than anticipated,” Swift said in a letter to shareholders. In reaction, the company sold trucks to offset the impact of idle equipment.
“We believe the best investment we can make at this time, for all our stakeholders, is in our drivers,” the company said. “Our goal is to clear the path for our drivers by helping them overcome challenges, eliminate wait times and take home more money. We believe we can accomplish this through improved productivity and enhanced pay packages.”
Swift’s difficulty finding drivers in the second quarter signals the shortage of available drivers will be the leading check on over-the-road truckload capacity this peak shipping season.
Further in the article Swift says:
In its shareholder letter, Swift said rate increases will likely hit the 4 to 5 percent range this fall. Higher pricing supported a 3.7 percent increase in revenue per loaded mile, excluding fuel surcharges, in the second quarter, and pricing momentum is growing, the company said.
Even so, Swift is bracing for cost headwinds in the second half of 2014 as it tests and implements several driver initiatives. “The investment in our drivers will be more immediate and the benefits are expected to be derived over time,” the truckload carrier said. “We believe by making these investments now, we can deliver on our goals for 2015 and beyond.”
Just sayin...

 

I heard they are gonna turn all there trucks up to 75

 

When Swift bought MS Carriers they put out the word that MS Carriers was buying Swift because they did not want the MS Carrier drivers to quit. When the MS Carrier drivers figured out they were driving for Swift they QUIT. LQQKS like They should have pit the word out that Central Refrigerated was buying Swift. Perhaps they could have kept their drivers a couple of extra weeks.

 

his might be part of why Swift's shares are dropping,


and the last time I posted it, it offended a few people

To show you a bit more about how this works and how different these companies are compared with "regular" companies, let's take a look at one of the companies that made our list last year. To make this interesting… let's take a look at one of the least likely companies to ever end up on a list of capital-efficient businesses – Heartland Express (HTLD), a trucking company.

What?!? How could a trucking company – with the huge capital investment required to maintain a fleet of trucks and trailers – end up in a list of capital-efficient stocks? How could a transportation company – supplying what's essentially a commodity – be a great business?

Incredibly, this company earns 10% a year on its asset base, produces returns on equity of 20% annually, and carries zero debt. If you read Heartland's latest letter to investors, you will see why almost immediately – exceptional management.

Heartland is the most efficient trucking company in America by a huge margin. Its operating ratio (operating expenses as a percentage of gross revenues) is the lowest in the industry. As a result, its profit margins are the biggest: Heartland has earned a 12% net margin over the last five years. The company earns more than a dime on every dollar of revenue. Swift Trucking, a larger trucking company picked at random for comparative purposes, earned about 2.5 pennies on each dollar of revenue in 2012.

The difference in profitability means everything. Swift, unlike Heartland, can't generate enough cash to afford its massive annual investments in trucks and trailers. So it has to borrow. It currently holds $1.3 billion in debt, requiring more than $100 million a year in interest payments. That makes a huge difference in a competitive business like trucking.

There's also no money left over for shareholders. Over the last three years, Swift hasn't returned a penny to shareholders. And instead of buying stock, the company has been issuing it – more than $800 million worth. It's as if, rather than working for the shareholders, the employees and management of Swift expect the shareholders to support them.

At Heartland, everything is different because of the focus on operational excellence. The company is producing more than $100 million a year in cash. It's no secret how it does it. The CEO explains: "We distinguish ourselves by operating a new fleet of well-maintained equipment, industry-leading driver pay, and outstanding federal Compliance-Safety-Accountability scores."

Heartland is constantly the highest-rated trucking firm in the country. It was 2013 FedEx carrier of the year with 99.8% on-time delivery. Again, the CEO explains exactly how they do it: "The achievement of our goals can only be attained through the hiring and retention of the best drivers in the industry."

Management seems willing to spend heavily on the things that matter and nothing on anything else. And that's the company's key competitive advantage.

There's a fascinating correlation – one that won't surprise you – between great business operators (like the guys at Heartland) and companies that are focused on creating shareholder value. Management owns 47% of the common stock. Its interests are aligned with yours, as the shareholder. Over the last five years, Heartland has paid $441 million in cash dividends. And it has purchased more than 12 million shares of stock ($180 million), reducing the shares outstanding by 12.6%.

Thus, merely by receiving the capital returned to you by the company itself, you would have earned about 40% in five years. Price appreciation (capital gains) is all "gravy." But there was plenty of that, too… Since December 2012, when Heartland first appeared on our list of capital-efficient companies, its shares have gone up around 50%.

Heartland's returns dwarf the returns available to shareholders in other trucking companies. And here's the crazy part: Until a recent spike in Heartland's share price, investors could have bought the company for $13 per share (it's now almost $20) – and at a price-to-earnings (P/E) ratio far lower than Swift's. In short, the market rarely recognizes the value of the differences between companies that I'm explaining here. And that's your edge. This knowledge gives investors who understand capital efficiency an almost unbeatable advantage.

Please understand… I'm not suggesting that you would want to buy Heartland now and hold it for the next three decades – especially not at its current price. Managerial excellence is difficult to depend on over long periods of time. Like Buffett explains, you should prefer to own a business that's easier to manage – that could be run "by monkeys."

I'm only using Heartland as an example to show you how these often-overlooked differences in a company's operations can make a huge difference in the returns available to shareholders over time. And over the long term, given Heartland's advantages, I'd expect it to vastly outpace the S&P 500 – which it has done lately:


Click here to view the original image of 510x325px.

If you can learn to beat the S&P 500 over time with a trucking stock by focusing on capital efficiency, then by focusing on businesses with higher gross margins and less capital requirements, you can do even better.

 

In October I'll get my 8th raise in 2 years only 2 of the 8 raises are mandatory cents per mile raises. The rest of the raises were given out to try and hire more drivers and lower turnover rate at my terminal.


Please by all means let this driver shortage continue...it will mean wages will go up do to more demand and less supply of drivers. For all the cynics out there lets look at the facts. The average age of a truck driver is 48, 20% to 25% of drivers are at retirement age, half the people in the United States that have a CDL aren't driving truck. Old Dominion, Fedex, ABF, etc. the high paying ltl jobs are advertising trying to get drivers because they can't get anyone because there aren't enough drivers available and are even training people who work on the dock to drive truck so they have more drivers. Unless you are an OTR driver (Intermodal is killing off OTR) things are good and will get better for the next several years.