The general conclusion by carrier executives is to be cautious in regard to equipment and expansion, according to a report of improving outlooks in the recent Transport Capital Partners (TCP) quarterly survey.
“Carriers are sensing an improving environment, with fewer interested in selling. At the same time, there appears to be a slight shift to considering equipment acquisitions for replacement, but adding only if certain criteria are met,” said Richard Mikes, a managing partner at TCP.
Of carriers surveyed, 38% are interested in buying other carriers in the next 18 months, similar to what was reported in surveys in the past two quarters. More than 70% of carriers predict credit availability to stay the same or increase over the next 24 months. While 19.6% felt credit availability would decrease over the next 24 months, 27.3% responded more optimistically, expecting credit availability to increase. The survey also found fewer carriers interested in selling over the next six months.
“Many carriers are asking themselves ‘Why sell now, when a better time may be in a year when credit and volume conditions and pricing are improving?’” said Lana Batts, a managing partner at TCP.
Equipment acquisition expectations for the next 12 months have shifted to a slightly more favorable outlook. The number of carriers expecting to acquire under 10% of their fleet dropped to 63% from 68% in the prior quarter. A total of 26.3% reported that they are acquiring 10% to 25% of their fleet, up from 23% a quarter earlier.
“The current month’s uptick in Class 8 sales is a confirmation of respondents general optimism for the future,” said Mikes. “However, responses to a question about adding capacity shows some caution is in the air, primarily until rates and volume improve.”
Almost a third of the carriers responded they most likely will add capacity only when the current fleet is fully utilized and rates increase sufficiently, while 16% said they had no plans to do so in the foreseeable future. A quarter will not add capacity until the economy improves.
“Clearly carriers believe they will make more money by raising rates than by adding capacity,” said Batts.