ODFL leads parade on improving earnings in Q1 for top publicly held LTL carriers

Led by perennial earnings champ Old Dominion Freight Line, the nation’s less-than-truckload (LTL) carriers as a group are enjoying a particularly strong earnings season—especially when one considers the first quarter usually is the slowest period for trucking in general with harsh winter weather bearing down on earnings. 
     
Not the case with ODFL, Thomasville, N.C., which posted a 36.3 percent rise in net income to $62.5 million on $696.2 million in first-quarter revenue, up 12.2 percent from the year-earlier quarter. ODFL posted a stunning 85.1 operating ratio, 200 basis points better than the year-early first quarter OR.   Revenue per hundredweight, excluding fuel surcharges, rose 6.2 percent year over year, another sign of burgeoning revenue growth.
 
Gleaning signs from a handful of publicly held LTL carriers, it’s possible to predict that perhaps the $35 billion LTL sector is one pace for its most profitable year in a decade.
  
David S. Congdon, ODFL President and CEO, said his company’s discipline is also evidenced on the decisions it makes every day as it continues to take market share away from LTL competitors.
  
“We operate a proven, flexible and innovative business model but it requires constant discipline in yield management and investments in our network, people and technology to make it work well,” he said on an earnings call with investors and analysts.
 
While ODFL was enjoying an 11.4 percent growth in tonnages per day, it was doing this while operating with a 99 percent on-time mark, with a minuscule claims ratio of 0.36 percent. The only slight adjustment was ODFL’s weight per shipment fell 1.8 percent in the quarter.
 
“I think a lot of that did have to do with that port congestion and their issues on the West Coast,” Congdon said. “Another thing that might be affecting our weight per shipment is that it’s obvious that we are winning some market share and it’s basically coming across the board, across the country, our industry peer group has a lower weight per shipment than we have. And so it stands to reason that if we’re winning market share then that might be pulling our weight per shipment down a little bit.”
 
Meanwhile, YRC Worldwide posted first-quarter operating income of $3.7 million, versus an operating loss of $32.4 million in the year-ago first quarter. YRC first-quarter operating revenue was $1.16 billion, compared with $1.21 billion in the 2014 quarter.
 
Long haul unit YRC Freight’s long-haul unit, reported a slim $200,000 operating income in the first quarter on revenue of $737.6 million, a $19.2 million decline from the $756.8 million in revenue reported in the first quarter of 2014. It had an operating loss of $32.5 million in the 2014 quarter. It had a 100 OR, basically a break-even proposition but a huge improvement from the 104.3 OR YRC Freight posted during the brutal winter of the 2014 first quarter.
  
James Welch, CEO of YRC Worldwide, said stronger pricing and a more profitable mix of freight is combining to produce a strong environment for the LTLs. YRC Freight is in the midst of tweaking its freight mix, trying to get more small and medium size shippers as it sheds some of its lesser yielding national accounts.
 
“Improving our yield and freight mix has been our No. 1 priority,” Welch said in an earnings call with investors. “We have been on a methodical march at all four operating companies to make adjustments and, at times, difficult decisions to improve yield and our freight mix. No doubt, we have traded volume for yield, but we are comfortable with the plan that we’re executing and will remain committed to that end.”
  
Improving the first quarter adjusted earnings before interest, taxes and other costs at YRCW from $23 million to $59 million “validates our strategy,” Welch said.
 
YRC’s regional carriers—Holland, New Penn, and Reddaway—posted first-quarter operating income of $4.6 million on revenue of $448.8 million. That’s down from $7.9 million operating revenue on $456.7 million revenue in the 2014 first quarter. Its OR was 99.
  
Con-way Inc. reported first-quarter 2015 net income of $21.8 million on $1.37 billion revenue, compared with $12.9 million net income in the year ago first quarter.
  
Con-way Freight, its largest unit, reported operating income of $37.4 million, more than double the $18.6 million in the previous-year first quarter, on $855.6 million revenue, a 0.9 percent increase from $848 million in the first quarter of the prior year. The year-over-year revenue benefit of higher base rates was largely offset by lower fuel surcharges, and to a lesser extent, lower tonnage, Con-way said.
  
Con-way officials say higher operating income was attributable to increased pricing and lower operating expense. Operating income in the quarter improved despite higher driver wages and benefits from the previously-announced driver pay increases. These increased payroll costs exceeded the benefit derived from lower weather-related expenses compared to the 2014 first quarter.

Revenue per hundredweight, or yield, increased 3.6 percent compared to the prior-year first quarter. Excluding fuel surcharge, yield rose 8.6 percent. Its operating ratio of 95.6 compared to 97.8 in the first quarter of the prior year.
 
“Con-way Freight delivered substantially improved results this quarter, reflecting sustained progress with our revenue management initiatives,” Douglas W. Stotlar, Con-way’s president and CEO, said in a statement. “While daily tonnage declined slightly compared to last year’s first quarter, we were able to increase yield. Going forward, we remain focused on initiatives to drive long-term profitable growth.”