Weather impacts Q1 earnings for Con-way
May 01, 2014
Even though the impact of the difficult winter weather could not be overlooked, transportation and logistics services provider Con-way said in its first quarter earnings release today that things are heading in the right direction.
Net income of $12.9 million—or $0.22 per share—was down 7.9 percent annually. Operating income—at $33.1 million—was up 4.5 percent annually, and revenue—at $1.37 billion was up 2.2 percent.
Con-way President and CEO Doug Stotlar said on a conference call that while the harsh winter weather impacted quarterly results Con-way finished the quarter in what he described as a strong demand environment that saw improving operating fundamentals.
Quarterly revenue at Con-way Freight, the company’s less-than-truckload (LTL) unit—at $848.0 million—was up 2.5 percent, with yield—or revenue per hundredweight—up 1.0 percent year-over-year— and was also up 1.0 percent excluding fuel surcharge. Tonnage per day increased 0.3 percent, and operating income of $18.6 million was up 15.9 percent compared to $16.0 million last year, but the company said that the winter weather negatively impacted operating income by about $18 million. Con-way Freight’s operating ratio was 97.8 compared to 98.1 a year ago.
“The negatively impacted operating income came from lower tonnage growth and increased costs,” said Stotlar. “The higher costs were mainly from lower productivity, and increased snow removal,” among other things.
For the three months of the first quarter, tonnage per day was down 2.8 percent annually in January, up 0.7 percent in February, and up 3 percent in March, with tonnage for the entire quarter up 0.3 percent annually.
Stotlar said the second quarter is continuing the sequential increases at Con-way Freight, up 3.3 percent annually in April. And he added that in the first quarter Con-way Freight rolled out a general rate increase of 5.4 percent that took effect March 31 and impacts about 25 percent of the segment’s total book of business.
“We also expanded lane-based pricing to all our contracted customers…and expect results of these two actions to drive continued yield improvement,” he said. “With respect to our line-haul optimization business, we saw year-over-year progress in the first quarter as purchased transportation declined and load factor increased.”
BB&T Capital Markets analyst Thom Albrecht wrote in a research note that Con-way Freight’s business mix between national and local accounts has been shifting in the past few quarters so, initially, it [was] tough to determine what the overall impact of weather was versus company strategy on its lane based pricing initiative.
“CNW is reporting that as the quarter progressed demand trends increased and helped create a ‘firm pricing environment,’” Albrecht stated.
Quarterly revenue at Menlo Worldwide, Con-way’s third-party logistics unit—at $406.4 million—was up 3.6 percent, which Con-way said was due to an increase in warehouse management services and partially offset by a decrease in transportation management services.
Menlo’s net revenue of $182.5 million was up 16.1 percent annually and was also due to increases in warehouse management services. Operating income dipped 4.7 percent to $6.2 million, and company officials attributed that to the effect of the change in mix between warehouse management services and transportation management services.
Quarterly revenue at Con-way Truckload—at $156.0 million—was down 0.6 percent year-over-year, and Con-way officials said the annual decrease was due in part to the effects of a 1.1 percent decline in loaded miles that was partially offset by a 0.4 increase in revenue per loaded mile, excluding fuel surcharge. Operating income at Con-way Truckload—at $6.4 million—was down 6.4 percent from $10.0 million last year as the winter weather impacted operating income by about $2 million.
“The difficult operating environment impacted efficiency, maintenance, fuel costs and asset utilization at Con-way Truckload,” Stotlar said on the earnings call. “As the quarter concluded, operations began to normalize, demand accelerated, and the pricing environment strengthened. The biggest challenge for Con-way Truckload going forward will be one of asset utilization. Driver retention and recruiting have become increasingly difficult.”
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