April the bottom for less-than-truckload?

“Old Dominion’s revenue results for May reflect the significant decline in the domestic economy as well as a decrease in fuel surcharge revenue. While economic uncertainty continues, we are encouraged by the gradual improvement in our daily revenue trend throughout the month of May,” said President and CEO Greg Gantt.

The year-over-year revenue decline is partly due to the precipitous drop in diesel fuel prices, which has resulted in lower fuel surcharge revenue for the carrier. Average diesel prices have moved more than 20% lower in the quarter compared to the same period of 2019. However, the spread between wholesale and retail diesel prices has widened in the second quarter, which presents a tailwind for earnings.

Gantt’s reference to improvement in revenue trends as May progressed was noted by Deutsche Bank (NYSE: DB) analyst Amit Mehrotra on a conference call with clients on June 1. The investment firm has been monitoring activity levels at Old Dominion’s more than 200 terminal locations using geofencing technology. Mehrotra said the data showed activity around the carrier’s facilities improved 21% from the first week of May to the last.

Johns Creek, Georgia-based LTL carrier SAIA (NASDAQ: SAIA) provided a mid-quarter update on Wednesday, June 3, as well. The carrier reported a 16.2% year-over-year decline in shipments during April as tonnage dropped 12.9%, partially offset by a 4% increase in weight per shipment. May’s results were better with shipments down 9.2% and tonnage off 8.8% compared to May 2019.

During Mehrotra’s conference call, he said the Old Dominion data, which showed activity improving 15% from April to May in the Northeast, would bode well for Saia’s May results. Saia has significantly added terminal capacity in the region over the last three years.  

In a note out to client’s today, Mehrotra said, “To be sure, June will be more telling, but we remain optimistic that LTL volumes (and freight volumes more broadly) bottomed in April and will see a steady improvement, which has positive implications for transportation equities and valuation. In this context we’re encouraged by both ODFL and SAIA’s update today.”

Shares of ODFL are up less than 1% in early trading with shares of SAIA moving nearly 3% higher. ArcBest’s (NASDAQ: ARCB) shares are up nearly 8% on a rating upgrade from Bank of America (NYSE: BAC).