Heartland posts Q4 loss but sees positive shift for Q1

Iowa-based truckload carrier Heartland Express reported its sixth consecutive quarterly net loss (excluding one-time gains) in its Q4 earnings report. The company posted a net loss of $1.9 million. For the 12 months ending Dec. 31, 2024, operating revenue was $1 billion, with an operating loss of $20.2 million.

Despite the ongoing financial challenges, CEO Mike Gerdin expressed cautious optimism regarding the company’s outlook for the first quarter of 2025. Gerdin highlighted a “positive shift in customer rate and volume negotiations,” anticipating strengthened momentum as the year progresses. However, he noted that extreme winter weather conditions have complicated year-over-year comparisons.

Revenue for the fourth quarter stood at $242.6 million, marking an 11.9% decrease from the previous year and an 8.9% decline when excluding fuel surcharge impacts. The company achieved an adjusted operating ratio of 98.9% in Q4, an improvement from the previous quarter’s 105.8% but still above industry benchmarks.

Heartland’s efforts to reduce debt have been noteworthy, with $100 million repaid in 2024 alone, bringing the total debt reduction since the 2022 acquisitions to nearly $300 million. The company ended the year with $187.9 million in net debt and no balance on its revolving credit facility, which remains largely unused with $88.3 million in available credit.

Operationally, Heartland’s tractor fleet increased its average age from 2.2 years on Dec. 31, 2023, to 2.5 years on Dec. 31, 2024. The average age of Heartland’s trailer fleet also rose during that period, from 6.4 years to 7.4 years. Legacy operations, including the 2019 acquisition of Millis Transport, showed an operating ratio of 96.3% in the fourth quarter, while newly acquired fleets including CFI and Smith Transport operated at 102.6%.

Looking ahead, Heartland did not give a timeline but aims to achieve an operating ratio in the low to mid-80s, expand its profitable revenue base through organic growth and future acquisitions, and return to a debt-free balance sheet. Gerdin adds, “In addition to margin progress, we are making strides toward our goal to be debt free. Even in this challenging and prolonged negative operating environment, we continued to generate positive operating cash flows. Since making the acquisitions in 2022, we have repaid almost $300 million of debt and capitalized leases while maintaining a relatively young fleet. From a capital allocation standpoint, we believe we are nearing the place where all alternatives will be equally available once again.”

December saw slower growth in freight volumes, slight contraction in capacity

On Monday ACT Research released its For-Hire Trucking Index, which saw declines in for-hire trucking volumes despite positive indicators like declining fleet capacity. The diffusion index is based on a survey of carriers in which a reading above 50 shows growth and a reading below 50 indicates degradation.

The volume index fell 1 point in December to 51 compared to November’s reading. The report notes that despite the economy exceeding expectations in consumer spending, for-hire volumes “have yet to find meaningful purchase out of the trough.” Carter Vieth, research analyst at ACT Research, added, “While freight is growing broadly, two years of private fleet capacity additions have diminished for-hire carriers’ slice of the freight pie. Additionally, while the retail sector is healthy, interest rate sensitive sectors like manufacturing and construction are sluggish. Tighter financial conditions are likely to slow volumes in these sectors, despite support from hurricanes and wildfires.”

The pricing index saw an increase of 3.8 points m/m in December to 55.3 seasonally adjusted. Both truckload spot and contract rates are rising but at a more modest rate compared to previous freight cycles. One factor behind the pricing increase may have come from the Federal Motor Carrier Safety Administration’s updated driver rules from the Drug & Alcohol Clearinghouse. ACT noted DAT equipment postings fell 33% y/y in December.

The capacity index was mostly flat, down 0.3 points m/m to 49.7 in December from 50 in November. Vieth adds, “Approaching three years of weak profitability, for-hire carriers aren’t in the position to add significant new capacity. Given the current volume and rate environment, we would anticipate for-hire capacity additions to remain at replacement levels, leaving the index at or around 50.”

While capacity was flat, driver availability rose 3.5 points m/m from 52.8 in November to 56.3 points in December. It’s the 31st consecutive month the index has been above 50. Private fleets were again noted. The report stated, “A large factor begetting for-hire driver availability is likely the 4-5% market share grab by private fleets the past two years. Struggling owner-operators turning in their operating authorities have also provided a steady supply of experienced drivers for fleets.”

Reefer rises while dry van and nationwide rejection rates soften slightly

Summary: The past week saw softening nationwide and dry van outbound tender rejection rates while the reefer segment experienced an uptick. Nationwide outbound tender rejection rates fell 49 basis points in the past week from 7.74% on Jan. 20 to 7.25%. Dry van outbound tender rejection rates continued to underperform the nationwide average and posted a larger decline of 75 bps w/w from 7.28% to 6.53%. The more volatile and smaller-by-volume reefer segment posted a gain of 43 bps w/w from 16.6% to 17.03%.

Despite the recent declines in OTRI, nationwide outbound tender rejection rates remain more favorable for carriers. Looking back over the past two years, OTRI is 190 bps higher than 5.35% in 2024 and 352 bps higher than 3.73% during 2023. Excluding the lingering impacts from the COVID-era freight boom and resulting bust from 2021 through 2022, seasonal nationwide outbound tender rejection rates are 65 bps higher than 2020 but 73 bps lower than 2019’s reading of 7.98%.

Looking ahead, truckload capacity continues to leave the market, but structural shifts from private fleets gaining greater share from the for-hire sector make for a cloudy freight crystal ball. Knight-Swift CEO Adam Miller best characterized the current conditions as more balanced but said guarded optimism remains.
Miller said in the company’s Q4 earnings release: “While current freight market conditions have been choppy, we are encouraged by customer sentiment, seasonal spot rate progression, the continued erosion of capacity, and early bid season activity — all of which point to a more balanced market than we have seen in roughly three years.” Miller added that so far in bid season, the company is asking for mid-single-digit rate increases, an improvement from the low-to-mid-single-digit range it was asking for in Q3.

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