3PLs Perform Consistently in Third Quarter 2014

ARC Advisory Group (Logistics Viewpoints) tracks the recent quarterly revenue results of the seventeen most prominent publicly traded 3PLs. The report is published after all the companies on the list release their revenues. The off cycle earnings results by some large 3PLs delays the publication of our quarterly overview. However, we believe the delay is superseded by the benefit of publishing a more comprehensive overview of the 3PL market.

The 3PL market – defined here as non-asset based transportation, warehousing, and integrated supply chain services, experienced moderate growth in the third quarter of 2014.  The growth increased due to the performance of 3PLs in the contract logistics segment, especially in the EMEA region. The overall third quarter revenues across the seventeen public firms covered in this analysis increased by 5.3 percent year over year.  Only three of the 3PLs witnessed decline in revenues. High flyers, 3PLs with double digit growth year over year in third quarter revenues include:

  • Expeditors International of Washington, up 10.9 percent – Growth was mainly due to the increase in volume of airfreight and ocean freight.  Management attributed the growth to disciplined execution and efficient handling of business acceleration.
  • J B Hunt, up 19.7 percent – The growth in revenues was mainly due to increase in load volumes and rates per load.
  • Norbert Dentressangle, up 21.7 percent – This increase was mainly due to the performance of acquired Daher in France and Russia, and the success of the reorganization in China over the past 12 months. Norbert has also finalized the acquisition of Jacobson Companies, on August 29th 2014. The revenues from the acquisition will be reflected in the fourth quarter.

Companies witnessing decline in revenues include:

  • Agility, down 3.6 percent – The decline was because of the winding down of major project logistics contracts.
  • CEVA Logistics, down 1.4 percent – The decline was due to the continuation of challenging market conditions and softness in export out of Asia Pacific and some countries in Europe. CEVA has also focused on terminating low margin or loss making contracts that resulted in reduced revenues.
  • UTi Worldwide (3Q ended in October), down 6.6 percent – The decrease was attributed to the service issues and billing challenges associated with the rollout of the freight forwarding system in the United States.

Our analysis of the 3PL market includes three categories of non-asset based services (referred to as “contract logistics” in Europe):

  • Non-asset based domestic transportation services (brokerage and managed transportation services)
  • Non-asset based international transportation services (freight for-warding and customs services)
  • Warehousing services (warehousing and associated services such as packaging, light assembly, sequencing goods for a factory line)

Warehousing services, in aggregate across providers, experienced growth of 5.9 percent in the third quarter 2014.  This was the highest growth rate among the three categories of 3PL services. Warehousing services represents about 30 percent of the total revenues in this analysis of the 3PL market.

Top performers in this segment include:

  • Hyundai GLOVIS, up 11.4 percent
  • J B Hunt, up 13.2 percent
  • Menlo Conway, up 16.7 percent
  • Norbert Dentressangle, up 17.4 percent

Companies witnessing decline in revenues include:

  • CEVA Logistics, down 1.8 percent
  • Panalpina, down 15.4 percent

Non-asset based international transportation services grew more modestly, with an aggregate revenue increase of 4.9 percent during the third quarter. The international transportation segment is the largest category, accounting for 53.1 percent of therevenues in our analysis.

Top performers in this segment include:

  • Expeditors International of Washington, up 10.9 percent
  • Hyundai GLOVIS, up 10.5 percent
  • Norbert Dentressangle, up 80.3 percent

Companies witnessing decline in revenues include:

  • Agility , down 3.6 percent
  • CEVA Logistics, down 1.1 percent
  • UTi Worldwide, down 11.4 percent

Revenues from non asset-based domestic transportation services were up in the third quarter by 5.2 percent. The domestic transportation services segment accounts for 17.1 percent of the total considered revenues for 3PLs.

Top performers in this segment include:

  • Hitachi, up 6 percent
  • J B Hunt, up 35 percent

Companies witnessing decline in revenues include:

  • Hyundai GLOVIS, down 9 percent
  • Menlo Conway, down 1.9 percent

*Please note, our analysis excludes asset-based transportation revenues from Agility, Hyundai, J B Hunt and Norbert Dentressangle.

If you would like a complete copy of this analysis, including the results of the seventeen 3PLs covered, please contact chanf@arcweb.com.

The next report on 4Q14 and full year FY14 will be released in the last week of March, as UTi’s 4Q ends January 31st and is expected to report revenues by 26th March.