Analyst: LTL industry could be heating up

   The LTL industry has experienced a tonnage rise, with most major carriers reporting solid first-quarter numbers, according to a Stifel Nicolaus analysis, and as capacity shrinks, LTL tonnage should also see a nice second quarter.
   In the first quarter, Old Dominion and FedEx Freight posted big gains in tonnage, but all LTL carriers except for UPS Freight also experienced gains.
   Stifel said LTL growth will continue, in general, through 2016, and the firm increased its growth outlook. LTL volumes will increase by 3.5 percent to 5 percent this year, spurred on by the economic recovery, and then the growth will slow to between 2 percent and 4 percent next year, and between 1 percent and 5 percent in 2016.
   Calling the current market interesting, Stifel pointed out that even though the economy is still weak, truckload carriers are seeing constraints coming from old equipment, the driver shortage, and new regulations. The firm said this could give the LTL industry some market gains.
   The firm said stocks for LTL companies are seemingly valued higher than they should be. However, the firm added, “LTL operations are improving and the sector may ultimately take some modal share back, so we would be inclined to revisit our ratings given a pullback in the sector or market.”
   Carriers should be pushing for price increase, Stifel wrote. The firm has heard that contracts being renewed are showing a 4-percent increase in rates, year-over-year.
   “We also believe that with increased investment in dimensioners by several carriers that we are getting closer to the industry switching to a density-based pricing model vs. the archaic classification system currently in use,” the firm wrote. “Such a change would help the carriers, in our view, by better enabling them to match rates with their costs.”