Con-way reduces earnings guidance

Jeff Berman, Group News Editor -- Logistics Management, 10/2/2008

SAN MATEO, Calif.—Due to declining economic conditions, freight transportation and logistics services provider Con-way announced it is reducing its 2008 full-year earnings from between $3.00-to-$3.40 per diluted share to between $2.60-to-$2.80 per diluted share.

This news represents another indicator of what continues to be a challenging time in the freight transportation industry, with truck tonnage, railroad, and intermodal volumes down largely year-over-year, coupled with low import totals, and an ongoing consumer spending slow-down.

“The economy has been battered by an unprecedented confluence of macroeconomic crises, curtailing demand for freight transportation services,” said Douglas W. Stotlar, president and chief executive officer of Con-way Inc, in a statement. “Over the past several weeks we have seen volumes decline further, exacerbated by September’s weather events, all of which continue to pressure yields. To date, the traditional peak seasonal uptick in demand has been muted so we expect the challenging business environment to continue through the 2008 fourth quarter.”  

J.P. Morgan analyst Tom Wadewitz wrote in a research note that this announcement was driven by a combination of a significant deterioration in LTL (less-than-truckload) demand in September and weaker pricing. He added that price competition in the LTL market has also increased.

“Our sense is that July and August were soft but September fell off meaningfully,” wrote Wadewitz. “We believe that [Con-way’s] September tonnage was weaker than the July and August levels which is highly unusual in light of the more typical seasonal pattern in which September is the strongest month of 3Q.”

In a recent interview with LM, John Labrie, president of Con-way Freight, the company’s LTL unit, said that in light of current market conditions—and from a freight operations perspective—Con-way Freight is preparing for the possibility that the rest of 2008 could be very soft because of what is happening in the economy. Should there be an uptick, though, Labrie said Con-way is well-prepared from a capacity standpoint with assets and people should a bounce in business activity occur.