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Forward Air CEO: ‘If there is a recession, bring it on’

Expectations pushed higher again as events business coming back

Forward Air CEO: "Let’s be very clear, our model gets us way past $7 for 2022.” (Photo: Jim Allen/FreightWaves)

Asset-light trucking provider Forward Air raised its full-year outlook again. The company beat second-quarter expectations and sees several tailwinds that will contribute to higher earnings in the future.

Forward (NASDAQ: FWRD) reported its highest-ever quarterly earnings Wednesday after the market closed. Earnings per share of $2.04 in the second quarter was 21 cents ahead of the consensus estimate and 94 cents better than the year-ago result. It also outpaced management’s initial guidance range of $1.59 to $1.63.

Management raises guidance again

On a call with analysts Thursday morning, Chairman, President and CEO Tom Schmitt talked through the catalysts behind Forward’s latest guidance raise.

He said events like trade shows, concerts and cruises, which have historically represented a big share of the company’s profitability, are continuing to increase in frequency and are expected to step higher again next year. These are high-margined pieces of business that often involve multiple shipments of the same freight.

“People are thirsting for events,” Schmitt said. “They are thirsting to fly, they are thirsting to take a cruise and to go to a concert.”

Forward is no longer solely working through domestic forwarders for events freight. It’s also selling its service directly to small events companies. Schmitt said bypassing the intermediaries and selling directly to small and midsize shippers has helped improve Forward’s freight profile and margins across all of its modes. He previously stated margins double when cutting out the middleman.


In the 2022 first-quarter release, management pulled forward the low end of its 2023 EPS range, $6.30, by a full year. It is now guiding to at least $7 in EPS during 2022, which compared favorably to the consensus estimate of $6.69 at the time of the print.

Forward is also reducing the usage of third-party carriers for linehaul moves, which is expected to support the higher earnings number.

During the second quarter, brokered capacity accounted for 12% of less-than-truckload linehaul miles. That number was halved from the first quarter and the expectation is it will continue to decline. Forward sees better service metrics when it uses its network of mostly dedicated independent contractors. A broader loosening of truck capacity is making this possible.

Capturing more share within legacy customer accounts, better flexing drivers from the final-mile division to support the LTL operation and improved results in the supporting businesses also contributed to Schmitt’s raised expectations.

“I would say: If there is a recession, bring it on. Oftentimes it feels like waiting for something is more scary than the event itself,” Schmitt said.

He acknowledged a 40% jump in revenue per shipment during the quarter was bolstered by much higher fuel surcharges. However, when stripping out fuel, the metric was 26% higher year over year (y/y). The $7 target for this year, more than three times the EPS result in 2020, assumes a headwind from lower fuel prices.

Forward also issued third-quarter targets.

Revenue is expected to increase between 20% and 24% y/y, implying $512 million at the midpoint of the range, $9 million higher than the consensus estimate. An EPS range of $1.88 to $1.92 sits above analysts’ current forecast of $1.67 and the 2021 third-quarter adjusted result of $1.14.

Tonnage is 3% higher y/y through the first three weeks of July.

While EPS is expected to step slightly lower sequentially in the third quarter, Schmitt said the guide assumes some conservatism. “Let’s be very clear, our model gets us way past $7 for 2022.”

Table: Forward’s key performance indicators

Q2 highlights

Consolidated revenue of $515 million was 23% higher y/y, modestly beating management’s outlook calling for 18% to 22% growth. The company’s expedited freight unit, which includes LTL, truckload and final mile, saw revenue increase 16% y/y to $409 million. Revenue growth in the LTL business (+25%) again led the way.

Over the last year, Forward has completed a freight swap, removing lighter, lower-yielding freight for denser, higher-valued goods. The change resulted in flat tonnage y/y in the quarter, however revenue per hundredweight, or yield, was up 22% (+10% excluding fuel surcharges). The increases in yield continue to mount even as heavier shipment weights drag down the metric. Weight per shipment was up 15% y/y in the period.

Better-yielding loads led to a 15.4% operating margin in the expedited segment, 560 basis points better y/y. Most expense lines as a percentage of revenue declined with both the salaries, wages and benefits and purchased transportation lines declining more than 200 bps each y/y.

The LTL operating ratio was 80.3% in the quarter and management believes it can reach 70% over time.

Intermodal revenue was up 54% y/y to $106 million. Revenue per shipment jumped 58% and was only partially offset by a 4% decline in loads. Past acquisitions in the unit were also a contributor. The segment posted a 14.3% operating margin, 220 bps higher y/y.

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Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.
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