ODFL raises third quarter tonnage expectations

In what has become a fairly common occurrence, less-than-truckload carrier Old Dominion Freight Line (ODFL) said it has raised expectations for third quarter LTL tonnage growth.

ODFL is calling for an annual increase tons per day in the 18.0 percent-to-18.5 percent range compared to the third quarter of 2013, which is up from its previously disclosed range of 17.0 percent-to-18.0 percent. The company’s annual increases for LTL daily tonnage for July and August came in at 18.8 percent and 19.0 percent, respectively. And ODFL also affirmed its expectations for comparable growth for LTL revenue per hundredweight, excluding fuel surcharges, to be in the 2.0 percent-to-2.5 percent range for the third quarter.

“Our strong growth in LTL tons per day for July and August, and our expected growth for the full quarter, reflect our ongoing expansion in market share while maintaining our price discipline,” said ODFL President and CEO David S. Congdon in a statement. “The growth in our LTL tons per day has accelerated throughout 2014, which we believe is attributable to the increased demand for our superior service.”

ODFL’s second quarter revenue was up 19.1 percent at $703.0 million, and net income was up 26.8 percent to $73.8 million. The company’s operating ratio (OR) in the second quarter was 82.5 percent, which is the best in the company’s history.

Stifel Nicolaus analyst David Ross wrote in a research note that ODFL raising its guidance has almost become expected after the last couple of quarters, noting that the “LTL market remains hot, and the company continues to grab share.”

And he also explained that yesterdays strong ISM Manufacturing Report on Business for August, which saw its key metric, the PMI, check in at 59.0 for its highest reading since March 2011, bodes very well for the LTL sector in general, as the industrial economy is typically a strong indicator for LTL tonnage growth.

Ross also stated that September is seasonally the best month of the quarter for LTL carriers, with the next four weeks to determine if ODFL will exceed its expectations.

Second quarter LTL earnings from publicly-traded carriers were fairly strong on average and while higher volumes and decent pricing may have served as the primary drivers for a strong second quarter, there were other factors contributing to the quarterly success as well.

Satish Jindel, president of Pittsburgh-based SJ Consulting, told LM in a recent interview that LTL volumes are solid and seeing increases in tandem with pricing that is holding due to the fact that a good balance of LTL capacity remains tight in many cases.

“Carriers currently have a good mix of shipment and capacity balance in order to reap the profits and reinvest into the business,” Jindel said.

Another common theme among carriers in their second quarter earnings announcements was one of moving the right kind of freight, or the freight that has the highest margins. This is a firm indicator of positive industry momentum, especially considering that during the depths of the recession, most LTL’s were moving freight that, in many instances, was not profitable, to keep their networks moving.