Saia posts blowout fourth quarter earnings report in post-Yellow LTL boom

Saia, the nation’s eighth-largest less-than-truckload (LTL) carrier, enjoyed a blowout fourth quarter with earnings exceeding Wall Street analysts’ expectations in one of the first indications of a post-Yellow freight boom in the LTL sector.

Saia came in ahead of most analysts’ forecasts and consensus expectations in 4Q and set themselves up for double-digit earnings growth this year. But there will be costs to this growth – Saia’s capital expenditures are to double this year as management leans heavily into terminal/door growth, equipment renewals and continued market share gains.

Saia was the largest single acquirer of terminals sold late last year in the Yellow Corp. bankruptcy liquidation. In December, Saia acquired 17 former Yellow terminals for $235.7 million.

In its first full quarter since the Yellow closing last August, Saia is showing strong pricing even as it expands revenue.

“Pricing trends remain strong at 8.7% year-over-year growth,” Jason Seidl, trucking analyst for TD Cowen Inc., wrote in a note to investors.

Saia enjoyed a revenue top line growth of 14.5% year over year. “(It) was driven by both strong tonnage and pricing in the quarter as the LTL carrier continues to benefit from Yellow’s exit, strong pricing and good execution,” Seidl wrote in a note to investors. Saia’s operating ratio (OR) of 85% was 90 basis points better than last year’s fourth quarter OR, Seidl noted.

Saia’s fourth-quarter tonnage was up 8.2% y/y. Industry leader Old Dominion Freight Line saw a 2% decline in the same period—on an 18.1% increase in shipments partially offset by an 8.3% decline in weight per shipment. Saia noted its underlying macro outlook “remains murky” though it sees network expansion as a catalyst to volumes in 2024 as Saia gains share in national accounts.

“We are encouraged to hear that service levels remain favorable despite volume influx (a sign of a well-run carrier in our view) which should also help with national business,” Seidl wrote.

Saia’s January tons/day were up 3.3% despite weather headwinds and a spring inflection, while uncertain, could produce robust volume growth for Saia,” Seidl wrote.

The LTL pricing environment remains favorable as Saia pulled forward contract renewals, increasing contracts it negotiated by 50% in the fourth quarter, the company said. Saia also had an impressive 8.7% renewal rate increase in contracts being renewed.

“Saia maintains that better traction with national accounts should also benefit pricing ability with those customers,” analyst Seidl said.

This will be a big investing year for Saia as its management expects $1billion net capex. That’s more than doubled the $437 million capex spend in 2023. This will largely be due to Saia expanding its footprint. It is adding $250 million with the initial Yellow investment in acquiring terminals and another $300 million in real estate investments.

Saia expects around $450 million will be invested into equipment (a lot of which Seidl called, “Catch up spending.”) and some additional IT spend.

Said expects to grow its door count by about 15% this year and potentially another 4%-5% if timing of new terminals is favorable. Despite so-so demand from industrial customers, Saia said investment in its network is encouraged.

More than 100 leased Yellow terminals have yet to find a new home. Analyst Seidel said he expects “Saia to continue to be on the hunt to improve/expand its network, though exact timing remains unclear.”

In other trucking earnings news:

Old Dominion Freight Line, the market leader in LTL, reported its run of record-setting fiscal years in revenue, profit and diluted earnings was snapped in fiscal 2023. 

The Thomasville, N.C.-based LTL company reported a 0.3% decrease in fourth-quarter net income to $322.91 million. That’s compared with a 10.1% decline in the third quarter.

Fourth-quarter tonnage was down 2% year over year  but came in better than analysts’ expectations. Tons/day were down 0.7% in October, -0.6% in November and  off 4.8% in December.

This year is off to a slow start as January tons/day on a year over year basis have come in below typical average of +0.3% and 1Q results hinge somewhat on a Spring inflection.

“With the macro outlook appearing significantly muted in the near term, we look to second half for volume growth though we note that ODFL stands to gain some market share as post-Yellow rate increases among peers compress the price premium that shippers face with ODFL,” Seidl said in a note to investors.

ODFL revenue per hundredweight rose 3% in the quarter and was up 7.5% excluding fuel surcharges. Through January, ODFL management has seen  revenue per hundredweight rise 6.4%, which is generally in line with seasonality.

“Further acceleration will hinge on seasonality returning through the remaining months of the quarter,” Seidl noted.

ArcBest, parent of the nation’s sixth-largest LTL carrier, ABF Freight System, reported its fourth quarter came in above analysts’ consensus expectations as asset-based margin improvement drove outperformance due to cost initiatives, strong core pricing gains and improved business mix.

This will be an investing year for ArcBest as the company adds about 350 new doors to its terminal network ahead of what it expects is an eventual rebound in demand.

XPO, the nation’s third-largest LTL carrier, reported above-expectations earnings for the fourth quarter. Analyst Seidl said he sees “another year of material improvement despite ramping up 28 (new) service centers.” XPO is on a trajectory to beat its long-term margin forecast with contract pricing renewals coming in at 9% higher despite weak core demand, Seidl said.

XPO plans to add 2,000 doors of capacity to its network once it integrates the 28 former Yellow Corp. truck terminals it acquired last year. That’s what XPO CEO Mario Harik said during a recent earnings call.

XPO won about 3,000 doors total. That’s more than any other bidder at the auction of Yellow assets.

Landstar, the nation’s third-largest truckload carrier, reported fairly disappointing earnings for the fourth quarter, missing analysts’ expectations. Landstar, which almost exclusively uses owner-operators, reported its “business capacity owners” count fell 4.6% sequentially, underscoring the continuing capacity leaving the trucking market.

Landstar management pointed to the number one reason drivers are leaving the industry, resulting in 20% of the turnover, was because of major repairs to equipment.

Landstar officials said they believe these driver departures are temporary, and cited a survey that suggested only 14% of the drivers leaving plan to do so permanently.

“Regardless, continued exodus from the market pressures Landstar’s core business model with no material inflection in sight,” Seidl said in a note to investors.

Landstar’s first quarter financial guidance came in well below consensus expectations at the midpoint of the quarter. Management expects revenue per load via truck to decline 9% at the midpoint in Q1 and load count to decline 15% at the midpoint as market weakness and normal seasonality takes its toll.

There are other carriers reacting to the freight slowdown, which is usual in the first quarter. Ruan, the 17^th-largest TL carrier, said it was laying off at least 215 workers in California, Virginia and West Virginia. The cuts take effect March 1.

In addition, UPS, the nation’s largest transport company, said it was reducing its total workforce by laying off 12,000 non-unionized workers. UPS had net income of $1.7 billion in both 2021 and 2022, but operating profits then dropped by more than half in 2023 to $834 million.

The move reflects a “change in the way we work,” UPS CEO Carol Tome said in an earnings call. UPS is also considering sale of Coyote Logistics, its brokerage business acquired in 2015.

“Perhaps the business is worth more to someone else,”  Tomé said on an earnings call.