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Less-than-truckload turning positive in August

Old Dominion and Saia see tonnage move higher compared to 2019

Unidentified LTL rig on highway (Photo: Jim Allen/FreightWaves)

A couple of reports from less-than-truckload (LTL) carriers show trends are beginning to turn positive on a year-over-year comparison.

Old Dominion Freight Line (NASDAQ: ODFL) reported a modest increase in revenue per day for the month of August. The Thomasville, North Carolina-based carrier said in a Thursday press release the metric was up 1.3% compared to August 2019. In its second-quarter filing, the company reported a 2.9% year-over-year revenue decline during July, following an 11.4% drop in June.

“We are encouraged by recent trends that contributed to the year-over-year increase in our LTL revenue per day for August. This positive inflection in our revenue is a result of improving demand trends from our customers in the industrial and retail sectors, which are increasingly prioritizing high-quality service from their carriers,” said President and CEO Greg Gantt.

The August increase in revenue was due to a 2.4% year-over-year increase in tonnage partially offset by a slight decline in revenue per hundredweight, or yield. August shipments were down 3.3% but weight per shipment rose 5.9% compared to the prior year. July tonnage was down 2.1% with a 0.7% decline in yield (including fuel). For the first two months of the quarter, Old Dominion reported revenue per hundredweight was 0.9% lower compared to the year-ago period but up 2.3% (excluding fuel surcharges).

On Wednesday, Johns Creek, Georgia-based LTL carrier SAIA (NASDAQ: SAIA) reported a 2.7% year-over-year decline in tonnage during July with a 0.5% increase in August. The carrier saw July shipments increase 1.5% with weight per shipment falling 4.1%. August shipments were down 0.1% compared to the prior year with weight per shipment increasing 0.6%.

The carrier didn’t provide an update on pricing or yields but management noted on a July 29 second-quarter earnings call that pricing trends had been “pretty steady” throughout the pandemic, with contract pricing “solidly” in the mid-single-digit range.

Manufacturing economy back online

The manufacturing segment, which can represent more than 80% of total tonnage for some LTL carriers, continues to strengthen. The Purchasing Managers’ Index (PMI), a survey of manufacturing supply executives and gauge of manufacturing activity, remained above the all-important 50% level again in August at 56%. A reading above 50% implies expansion in the U.S. manufacturing sector.

August marked the third consecutive month in expansion territory for the index after declining to the low-40% range in April and May. The index hovered near the 50% threshold for the bulk of the past year until the pandemic temporarily put a halt to production.

The new orders and production sub-indexes each continued to move higher as well. New orders climbed 6.1 percentage points after increasing 5.1 points in July. The component now sits at 67.6%, the highest level since the beginning of 2004. Production came in at 63.3%, with inventories contracting further at 44.4%.

The only blemish on the report was manufacturing employment, which improved in the month but remains in contraction territory at 46.4%.

Chart: Purchasing Managers’ Index; Institute for Supply Management (SONAR: ISM.PMI)

Less-than-truckload becoming a crowded field

Several expansion and growth initiatives have been announced by LTL carriers recently.

In early August, Old Dominion announced that it had already opened nine terminals this year to expand capacity and improve shipping times. Roughly 500 doors, mostly incremental capacity, have been added to the carrier’s network in the markets it currently serves as well as new regions.

Shortly after announcing it would pursue traditional LTL operations, outside of its normal airport-to-airport network, management from Forward Air (NASDAQ: FWRD) said on its second-quarter call at the end of July that it would further advance these efforts. The company could open as many as a “handful” of LTL terminals this year.

YRC Worldwide (NASDAQ: YRCW) announced last month that it was expanding its regional next-day service with the addition of more lanes in the Midsouth and Waco, Texas. The plan is part of the company’s overhaul and aimed at improving transit times and lowering damage claims as there will be fewer touchpoints on the new routes.

In mid-July, Roadrunner Transportation Systems (OTC: RRTS) announced plans to add three new LTL service centers in Chicago, Philadelphia and Riverside, California. Those terminals are expected to add 169 dock doors to its network. The announcement is part of the company’s restructuring designed to improve financial performance by transitioning from a full-service transportation and logistics provider to a national LTL carrier.

Click for more FreightWaves articles by Todd Maiden.

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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.