From the desk of Eric Heath, Bluejay Managing Director:
When I wrote about second-quarter results in August, the question I kept hearing from owners was whether the freight cycle had actually turned. The public carriers answered it about as clearly as public carriers ever answer anything: contract rates were climbing, capacity was leaving the market, and earnings at the largest fleets were moving in a direction buyers had waited more than two years to see.
The third-quarter reports from the past few weeks raise a different question, and I think it is the one that should matter more to an owner weighing a sale in the next year or two. U.S. Bank’s freight payment data shows shipper spending up 32.1% from a year ago on shipments that rose just 0.5%, which tells you the recovery is still being driven by trucks leaving the road rather than freight arriving. A recovery built that way lifts rates for nearly everyone. Still, it does nothing to slow fuel, insurance, healthcare, or driver pay, and the quarter showed very plainly that a rising rate does not carry the same weight on every income statement.
Truckload: where the rate increase actually went
Knight-Swift and Marten make the point better, read together, than any commentary I could add. Knight-Swift grew truckload revenue per mile 12.2% excluding fuel and converted 68% of that improvement into operating margin, up from 50% in the second quarter. Marten pushed its rate per mile up even further, by 14.1%, and still finished the quarter at a 98.6% operating ratio, with the company noting that higher fuel and health insurance costs alone took $3.7 million out of net income.
Anyone who has run a fleet will recognize what happened at Marten, because rate is the line you negotiate with a customer once a year, while fuel, insurance, healthcare, and driver pay are the lines that move against you every month. Fuel surcharge programs reset with a lag, and diesel rose roughly 39% between the first and last weeks of the quarter, so a carrier running reefer equipment and burning more fuel per mile effectively financed the increase for its customers until the surcharge caught up.
The rest of the group sorted itself along the same line. Schneider improved its truckload operating ratio by 380 basis points to 93.0% on better network pricing and productivity. Werner grew revenue 23% but earned a 2.2% adjusted operating margin after absorbing fuel, an accelerated investment in driver recruiting and a late-quarter reserve adjustment for past claims. Covenant’s truckload margins slipped even as it moved roughly 80% of its fleet under long-term contracts, and Heartland posted its first clean profit since 2023 while telling investors the repricing in its contracts will not fully show up until 2027.
The M&A implication is direct. Buyers who spent the last two years discounting carriers for weak rates are not going to pay a premium simply because rates went up, since every carrier in the market can now show that. What they will underwrite is how much of the increase a business kept, which customers and lanes it came from, and whether the cost structure behind it will hold through the next fuel spike or insurance renewal.
Rail and the pressure on long-haul dry van
The railroads split along much the same line they did in the second quarter. Union Pacific ran a 59.1% operating ratio on 6% carload growth, and CSX posted record revenue of $4.02 billion with intermodal volume up 7% and adjusted operating income up 25%. Norfolk Southern also reported record revenue, but fuel surcharges accounted for eight points of its 14% growth and its adjusted operating ratio worsened by 210 basis points, which is a useful reminder that revenue arriving through fuel pass-through and revenue earned through pricing are not the same thing, and the market treats them differently.
For truckload owners, the more consequential signal sits in intermodal. Knight-Swift’s intermodal segment reached its highest quarterly load count in more than five years, and ACT Research puts contract intermodal rates about 40% below dry van truckload. A shipper looking at a spread that wide will move every long-haul lane rail can reasonably serve, and a carrier whose revenue is concentrated in those lanes should expect a buyer to ask how much of its freight is exposed to conversion, and to price the answer into the offer.
LTL: the gap held, and widened in places
In August I argued that the margin gap between the best LTL networks and everyone else was structural rather than cyclical, and the third quarter did nothing to change my mind. Old Dominion grew revenue 13.1% and improved its operating ratio 280 basis points to 71.5%, on revenue per hundredweight up 5.1% excluding fuel while tonnage was essentially flat. XPO improved its adjusted LTL operating ratio by 260 basis points to 80.1% on tonnage up 5%, and Saia posted record revenue and tonnage at an 87.6% operating ratio, unchanged from a year ago on an adjusted basis. FedEx Freight reported its first period as a standalone company, a four-month transition period that is not directly comparable to the others, with a record-low claims ratio.
What strikes me about these results is that the LTL carriers were the clearest beneficiaries of the truckload squeeze rather than its victims. As truckload capacity tightened, heavier shipments that had migrated to truckload during the downturn began moving back into LTL networks; Old Dominion’s tonnage turned positive in September and stayed there into October; and carriers with density and pricing discipline converted that freight at margins truckload operators can only envy. For an owner of a regional LTL operation, the implication is that a buyer will judge you less on your tonnage trend than on your yield discipline and your claims ratio, because those are the two numbers that separate a network from a collection of terminals.
Brokerage: scale, claims and the price of control
The brokerage results tell two stories at once, and both bear directly on what a mid-market broker is worth today. The first is about scale. C.H. Robinson grew revenue 29.5% to $5.36 billion and raised truckload gross profit per shipment 17% even as its own linehaul cost per mile rose 33.5%, which is about as clean a demonstration of repricing discipline as the quarter produced. It also agreed to acquire RXO for $5.8 billion, with roughly $300 million of expected cost synergies. This transaction tells every buyer in the market the largest platforms are again willing to pay for density and customer access.
The second story is about liability, and it is the one I would ask brokerage owners to sit with. Landstar grew revenue 25%, but its insurance and claims expense rose to $55.3 million from $33.0 million a year earlier, including about $13 million of adverse actuarial adjustments, and management now expects that line to run between $35 million and $55 million a quarter. Schneider’s logistics segment was pushed to break-even by purchased transportation and claim costs. Meanwhile, the Dallas County judgment in the Lipe case against C.H. Robinson, a $604 million verdict that became a final judgment of about $711 million with prejudgment interest, sits against $155 million of per-occurrence coverage.
Landstar’s management concluded its call, saying it expects smaller brokers and owner-operators facing higher insurance and legal costs to seek the scale, safety infrastructure and balance sheet of larger networks. I think that is right, and I think it is the most important sentence in the quarter for anyone who owns a brokerage. Since the Supreme Court’s Montgomery decision in May, carrier vetting has stopped being a back-office policy and become a valuation input. The brokers that can show a documented, load-level selection process will attract competitive interest rather than a re-trade after the letter of intent.
What a buyer will ask you now
Put the quarter together and the shape of diligence over the next year becomes fairly predictable. A buyer will want to see how much of your rate increase reached operating income, broken out by customer and lane, because that evidence separates a business with pricing power from one that simply rode the market. They will look closely at how completely your fuel surcharge program recovers cost, since the third quarter showed how quickly a lag in that program can erase a rate gain.
They will also normalize your insurance, claims, and health-benefit costs over several years rather than accepting the most recent twelve months, and the quality of earnings that comes out of that exercise will set the EBITDA the multiple is applied to. For brokers, the carrier vetting file moves from confirmatory diligence into the first data request, and for carriers the same is true of safety performance and loss runs. None of these questions is new, but each now carries a price, and each is cheaper to answer before a buyer asks it than after.
Where this leaves owners
The recovery is real, and for well-run businesses the window it opens is a good one: the buyer set is deep, the largest platforms are acquiring again, and buyers are still willing to underwrite forward earnings rather than wait for trailing numbers to catch up. The question for an owner is not whether the market has turned, but whether their own financials will show the turn in a form a buyer can underwrite. If you are thinking about what that looks like for your business, I am always glad to have that conversation, well before any process begins.
A few results were still to come as this went to press, including GXO and ArcBest, and I will fold them into the next update.
Sources: U.S. Bank Freight Payment Index, Q3 2026 (rates via DAT) · Knight-Swift · Marten · Werner · Schneider · Covenant · Heartland · Old Dominion · XPO · Saia · FedEx Freight · Landstar · C.H. Robinson 10-Q · RXO · Union Pacific · CSX · Norfolk Southern · ACT Research
