Public LTL carriers Q2 earnings results are impressive so far

Even though not all publicly-traded less-than-truckload carriers (LTL) have posted second quarter earnings yet, the early consensus for those that have issued results is looking very good.

Some common themes among LTL’s that have issued earnings to date include: gains in tonnage, average daily shipments, weight per shipment, higher yield, and revenue per hundredweight, among others.

On top of that, LTL carriers appear to have a solid grip on pricing for their services, which has led to improvements in company operating ratios, commonly viewed as one of the most, if not the most, important metric for measuring performance. 

Revenues and operating incomes for publicly-traded LTLs:
-Con-way Freight had quarterly revenue of $940.5 million for a 5.4 annual increase, with operating income up 51.8 percent at $83.0 million;
-UPS Freight’s quarterly revenue at $771 million was up 5.5 percent; 
-ABF Freight second quarter revenue was up 9.4 percent, and operating income was up 24 percent at $22.8 million;
-Saia had a 12 percent increase in revenue to $330 million, while operating income was down slightly due to adverse claims and insurance experience; and
-Old Dominion Freight Line’s revenue was up 19.1 percent at $703.0 million, and net income was up 26.8 percent to $73.8 million

These numbers are strong overall, with not all public LTL carriers having reported second quarter earnings yet.

While higher volumes and decent pricing may serve as the primary drivers for a strong second quarter, there are 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 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.

LTL carriers like UPS Freight mentioned things like being “focused on profitable revenue opportunities” and Con-way Freight cited “revenue management initiatives that contributed to improved composition of freight in the network.

Joel Clum, president of Chicago-based freight transportation and logistics consultancy CarrierDirect, echoed this theme, explaining in an interview that on a shipment-by-shipment basis that there is freight that plays well with others but is not pricing correctly.

“We are seeing carriers with so much freight in their network now that are going back to shippers and telling them that the rates they are charging them are not conducive to their relationship, so it needs to be re-priced or we need to part ways because it is not worth it to the carrier anymore,” he said.

Stifel Nicolaus analyst David Ross said that pricing is expected to remain strong for LTLs, observing in a research note that tonnage growth remains strong through July, which will allow for a continuation of the favorable carrier pricing environment.