ODFL updates second quarter expectations for daily tonnage and revenue per hundredweight

Less-than-truckload (LTL) bellwether Old Dominion Freight Line (ODFL) said this week that it has updated its second quarter expectations for growth in LTL tons per day, and year-over-year growth in LTL revenue per hundredweight, excluding fuel surcharges.

For the former, ODFL noted that LTL tons per day in May saw a 9.6 percent annual bump, following a 9.7 percent increase in April, upping its overall quarterly estimate to 9.5-to-10 percent annually for the second quarter from its previously disclosed range of 9.0 -to-10 percent.

And for the latter, LTL revenue per hundredweight, excluding fuel surcharges, is now pegged at 5.0-to-5.5 percent, down slightly from an earlier estimate of 5.5-to-6.5 percent.

“We are pleased with the continued growth in our LTL tons per day, especially with the slowdown of the domestic economy this year. Our growth is supported by our ability to win market share as we continue to provide our customers with superior service at a fair price,” said David S. Congdon, Vice Chairman and Chief Executive Officer, in a statement. “We have, however, decreased our second-quarter guidance for revenue per hundredweight because the year-over-year increase in May was not as strong as we had anticipated. The quarterly year-over-year comparison will also be affected by our general rate increase implemented in May 2014. Our yield metrics for May 2015 were consistent with those in April 2015, and our updated second-quarter guidance continues to assume sequential improvement for the quarter. We remain disciplined with our pricing and believe the industry pricing environment continues to be stable.”

Jason Seidl, an analyst at Cowen and Co., wrote in a research note that ODFL’s reduction in its revenue per hundredweight guidance could be a sign that LTL industry tonnage softness is beginning to impact pricing.

“While industry demand has been moderating for a couple of quarters, pricing has generally held steady, as carriers remained firm in rate negotiations, armed, we believe, with the fact that memories of the 2014 capacity crunch, which affected all transport modes, were still fresh in shippers’ minds,” Seidl wrote. “We do not believe that LTL industry pricing is going to fall off a cliff, but a gradual moderation in rate increases is likely as long as the macro environment remains tempered.”

In the first quarter, ODFL 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.

On a first quarter earnings call, Congdon said that ODFL’s discipline is 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.

LTL, as well as several of its competitors, had a particularly strong earnings season in the first quarter—especially when one considers the first quarter usually is the slowest period for trucking in general with harsh winter weather bearing down on earnings.