ODFL’s third quarter update highlights domestic economic softness

Earlier this week, national less-than-truckload (LTL) carrier Old Dominion Freight Line (ODFL) provided guidance for key operating metrics in August.

The Thomasville, N.C.-based carrier reported that revenue per day in August was down 0.7% annually, attributing that to a 5.2% decline in LTL tons per day that was partially offset by an increase in LTL revenue per hundredweight. ODFL said that the decline in LTL tons per day was due to a 1.2% decrease in LTL weight per shipment and a 4% decline in daily LTL shipments.

On a quarter-to-date basis, ODFL said that LTL revenue per hundredweight and LTL revenue per hundredweight, excluding fuel surcharges, were up 4.8% and 6.1%, respectively on an annual basis.

“Old Dominion’s revenue results for August reflect continued softness in the domestic economy as well as a decline in fuel surcharges,” said Greg C. Gantt, ODFL President and Chief Executive Officer, in a statement. “While shipments decreased on a year-over-year basis, we remained committed to our disciplined yield management process. The 4.8% increase in revenue per hundredweight, which also includes the favorable effect from the decrease in LTL weight per shipment, was supported by a stable pricing environment and our ability to deliver superior service to our customers.”

On ODFL’s second quarter earnings call, Gantt said that the company has seen general softness with demand, coupled with mixed economic signals, while added that he believes ODFL is continuing to win market share and maintaining its price discipline while doing so. He attributed that to the company’s ability to win market share, and its  “superior service offering delivered at a fair price.”

As for the second half of 2019, he said, at the time, that ODFL will continue to focus on controlling our cost, saying he expected softer demand to continue, with ODFL well positioned to respond to any acceleration in volumes that might occur if the domestic economy regains momentum.

In a previous interview with LM, Gantt said ODFL is busy across the entire market, whether it is the industrial economy, the retail economy, and everything else it is in, like its medical business, for example.

“It really applies to all aspects of our industry relating to our customers’ business lines,” he said. “There is some impact on the last-mile side, too, and there are some different ways to ‘skin that cat’ by hauling product out from the Amazon’s of the world and deliver it to somebody’s home. That is one aspect.  A company like Amazon not only has last-mile, they also have middle mile, with somebody bringing freight into a DC that does not always come in as a truckload. A lot of it arrives via LTL, and we think that is where we fit maybe in many cases better than in the last-mile piece of that business. But we have outlets for that, too.”

Robert W. Baird and Co. analyst Ben Hartford wrote in a research note that ODFL’s third quarter to date tonnage trends are consistent with weak data points from August, including the ISM’s August manufacturing data, which entered contraction territory after 35 consecutive months of growth

“ODFL cited continued softness in the domestic economy as primary driver of softening trends,” he wrote. “Recall, July trends also reflected weakness (July 2019 tons per day decreased -6% yoy, weight per shipment -0.7% yoy). Trends announced [by ODFL] are likely slightly below our/consensus expectations.”