LTL/transportation: Con-way reports Q3 net income is down 66 percent
Jeff Berman -- Logistics Management, 11/4/2009
With freight volumes remaining low despite some positive economic indicators of late, lower net income and revenue has been the case for nearly every freight transportation and logistics service provider during third-quarter earnings. And today's earnings announcement from transportation services provider Con-way was no exception.The company reported today that quarterly net income at 13.5 million was down 66 percent year-over-year, and quarterly revenue at $1.13 billion fell 17.3 percent. And operating income at $41.1 million was off 47.9 percent.
Con-way officials said that third quarter earnings included the effect of a change in accounting estimate related to revenue adjustments at the company's less-than-truckload unit Con-way Freight, which reduced net income by 7 and 5 cents, respectively. Without these charges, the company's quarterly earnings per share were 39 cents, compared to 27 cents, which was the official tally.
Con-way President and CEO Douglas W. Stotlar said in a statement that Con-way's operating companies have adjusted to the "resetting economy," while the business environment remains challenging, due to weak demand, excess capacity, and pricing pressure, which, he said, are likely to continue in the near future and continue to impact earnings growth.
And on an earnings conference call earlier today, Stotlar said that while these quarterly results reflect near-term challenges, each of Con-way's three operating units-Con-way Freight, Con-way Truckload, and Menlo Worldwide Logistics-have adjusted to current economic conditions.
"Competitive pricing and reduced fuel surcharge revenue drove our revenue decline...and offset increased volume, with tonnage per day up 5.1 percent year-over-year and 11.9 percent over the second quarter," said Stotlar.
Revenue breakdown by company segment: Con-way Freight's quarterly revenue at $692.8 million was down 14.3 percent year-over-year. Stotlar added that a strategic decision implemented by Con-way over the past two quarters to improve network utilization was effective, but added that profits were constrained by pricing levels and high variable costs. Quarterly operating income at Con-way Freight was $22.8 million, down 62.7 percent from last year's third quarter.
Revenue at Menlo Worldwide, the company's 3PL arm, was $344.4 million, an 18 percent year-over-year decline. But quarterly operating income of $9.5 million was up 159 percent year-over-year. And revenue at Con-way Truckload was $95.7 million, a 32.2 percent decline, with operating income down 30.1 percent at $10.6 million.
A Wall Street analyst noted in a research report today that the uncertainty regarding the future of LTL giant YRC Worldwide will continue to impact LTL-intensive companies like Con-way.
"We believe that a lack of resolution to the viability of YRCW is a major issue for the LTL market as competitors...;push pricing down in part to take advantage of YRCW's distressed situation," wrote J.P.Morgan Chase analyst Tom Wadewitz. "However, as YRCW continues to find a way to survive, LTL has become a difficult area in which to make money for most participants. We believe that it will be difficult for the LTL stocks to work in the near term without greater visibility on the ultimate status of YRCW."
And Jon Langenfeld, Robert W. Baird Co. analyst noted that Con-way's inconsistent LTL pricing strategy has been a lingering concern over the past several quarters as it "has struggled to find the appropriate balance between volume and pricing growth and leading to inconsistent Freight results."
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