Heartland Express (NASDAQ:HTLD) is a trucking firm that ships appliances, automotive parts, and retail goods. As a truckload carrier, Heartland contracts an entire trailer-load to a single customer, as opposed to less-than-truckload firms who consolidate freight from several customers in one trailer-load. Unlike competitors who offer an array of trucking services, Heartland focuses exclusively on the short-to-medium haul dry van market (meaning contents are mainly non-perishable), with an average haul length of just over 500 miles. This arrangement lets Heartland use mostly single, rather than team drivers, and reduces the need for intermediate equipment changes. In addition, shorter routes mean more regular maintenance checkups and fewer breakdowns. Heartland’s management focuses on minimizing costs through the efficient use of late model equipment (e.g. maintaining a high tractor to trailer ratio, which makes it easier to reposition trailers for loading and unloading, reducing waiting time). Maintaining newer equipment ensures less breakdowns and delays. Its trailers have an average age of 5.6 years^[1] (most trailers in the industry are kept for ten to twelve years). The intrinsic advantages of this niche market and Heartland’s emphasis on cost reduction have helped the company generate one of the highest operating margins and returns on invested capital in the industry. The company earned $460 million in revenue and $57 million in net income in 2009.^[2]

Despite this focus on reducing expenses, Heartland also pays its drivers one of the highest rates in the industry. This no doubt partly explains why Heartland’s driver turnover rate is 40% lower than the industry average, a significant advantage at a time when truckers face a shortage of drivers. High wages also ensure that Heartland can attract the kind of experienced drivers it needs to deliver a consistently high level of service.

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