In parting ways with its old railroad partner BNSF for a new relationship with Union Pacific, US trucking giant Schneider National has found that the grass isn’t always greener on the other side. Six successive quarters of negative revenue and profit growth in the eighteen months of the new partnership has proven that life isn’t always so great when you take a leap to another.
Schneider was western US railroad giant BNSF’s largest intermodal trucking partner in a relationship that lasted 30 years. With the contract due for renewal in 2023, it chose to move into a deal with BNSF’s rivals Union Pacific.
At the time of the announcement, Schneider CEO Mark Rourke said, “We want to put ourselves in the best competitive position to take advantage of what we think is some real advantages that we bring to the marketplace with our own container chassis and our company dray model”. The company stated that it intended to double its intermodal revenues by 2030. As can be seen in the table below, this isn’t so likely to quite come to fruit:
Schneider Quarterly Intermodal Revenues 2022-2024
|
$m |
2022 |
2023 |
2024 |
|
Q1 Revenues |
302.1 |
266.1 |
247.1 |
|
Q1 Profits |
38.9 |
30.0 |
7.0 |
|
Q2 Revenues |
335.1 |
261.0 |
253.1 |
|
Q2 Profits |
42.3 |
23.7 |
14.6 |
|
Q3 Revenues |
334.7 |
263.0 |
|
|
Q3 Profits |
31.1 |
11.1 |
|
|
Q4 Revenues |
315.5 |
260.6 |
|
|
Q4 Profits |
52.8 |
6.2 |
|
Income has been hit as well as revenues, with falls as high as 88.3% y-o-y between Q4 2022 and Q4, 2023. In its annual report for 2023, the company explained, “This was driven by a decrease in revenue per order of $315, or 11%… additionally orders decreased by 8% driven by market conditions”.
Revenues fell by 7% y-o-y in Q1, 2024 and 3% y-o-y in Q2, suggesting that even if there might have been a bump after the change of major client railroad, Schneider isn’t out of the woods yet. CFO Darrell Campbell said in the Q2 2024 earnings call that again, “Intermodal revenues [and earnings] were impacted by lower revenues per order…”
The split from BNSF hasn’t entirely been to one partner, but two. Schneider clearly took a mid term view of the trend for nearshoring of manufacturing to Mexico with a partnership with Canada Pacific Kansas City (CPKC) Railroad that hauls goods across the US border. Volumes have grown in this area, and could well be a good bet in the future but for now, they remain a much smaller interest than those volumes around the Western US carried by Union Pacific.
Given data from the last six quarters, it seems unlikely that Schneider will achieve the goal of doubling its intermodal revenues by 2030. Perhaps the grass isn’t so greener on the other side after all?
Author: Richard Shrubb
