FreightWaves Finance Editor Todd Maiden breaks down Q3 earnings. Capacity drawdown continues, but demand needs to catch up. LTL carriers showed demand improvement and managed costs, while truckload saw profit growth lag. What’s your take on the outlook?
LTL carriers outperformed expectations on both tonnage and pricing in the third quarter, while truckload operators faced mounting cost headwinds that pressured margins even as revenues climbed, according to FreightWaves finance editor Todd Maiden, who covered the earnings reports for multiple public carriers.
Old Dominion Freight Line led the LTL pack, posting its first year-over-year tonnage gain in two years — an inflection that began in September and held into October. The carrier’s revenue per shipment outpaced cost per shipment by 440 basis points, restoring a favorable spread that had been absent for several quarters. Old Dominion reported an operating ratio of 71.5 for the quarter, with XPO and Saia both reporting ORs in the 80s. All three carriers guided for sequential OR deterioration in the fourth quarter, which Maiden attributed to normal seasonality rather than fundamental weakness, noting Old Dominion’s implied Q4 OR of 73.5 would still represent 320 basis points of year-over-year improvement. XPO and Saia were each tracking at least 250 and 230 basis points of year-over-year OR improvement, respectively.
Diesel prices surged 48% year over year during the quarter, acting as both a revenue tailwind through fuel surcharges and a risk factor for investors. Fuel surcharge recoveries lagged diesel costs in 9 of the 13 weeks of the quarter, and LTL stocks broadly fell roughly 30% from their early-to-mid-June peak, partly on concerns that carriers are over-earning in an inflationary fuel environment. Maiden noted that the concern centers on what kind of earnings-per-share headwind will materialize when diesel prices moderate.
“Old Dominion talked about, look, they’d much rather have some sort of resolution to global energy prices and domestic diesel prices before they become meaningfully demand destructive than the tailwind from fuel revenue,” Maiden said.
On the demand side, Maiden pointed to 10 straight months of ISM improvement — now in growth territory — as closely aligned with large national LTL carrier tonnage trends that turned positive in March and have continued to accelerate. He said increasing weight per shipment reflects more industrial freight moving through networks and some freight returning from truckload, both of which he described as encouraging structural signals rather than purely fuel-driven revenue gains.
In truckload, Knight-Swift stood out from peers J.B. Hunt and Werner, reporting 700 basis points of OR improvement and guiding toward an OR of approximately 86 for the fourth quarter. About 70% of Knight-Swift’s fleet operates in one-way, non-dedicated lanes, giving it greater spot market exposure. The carrier said its tender rejections ran 2 to 3 times above the broader market, its spot rates exceeded market averages, and it was carrying its most peak-season project freight since the pandemic. A new internal slide shared by Knight-Swift showed revenue per total mile versus cost per total mile, both excluding fuel, swung from a 90-basis-point lag in the first quarter to a 390-basis-point positive spread last quarter and an 840-basis-point positive spread in Q3. The carrier guided for low-double-digit to mid-teen rate increases on one-way bids, with bid season having started this month.
Maiden said dedicated-heavy carriers like J.B. Hunt and Werner face a structurally different dynamic: dedicated contracts are more durable and tied to PPI escalators, which smooth but also slow rate recovery. “Recoveries aren’t linear,” Maiden said, adding that most operators acknowledge demand needs to inflect more materially to sustain the upcycle — but that carriers flagging double-digit rate increases on non-dedicated fleets and signaling a desire to grow fleet counts again after two years of trimming suggests the industry believes the recovery has legs.
- Old Dominion’s revenue per shipment outpaced cost per shipment by 440 basis points in Q3, with tonnage turning positive year over year for the first time in two years.
- Knight-Swift reported 700 bps of OR improvement and an 840 bps positive spread between revenue and cost per mile ex-fuel, guiding to low-double-digit to mid-teen one-way rate increases.
- Diesel prices rose 48% year over year in Q3, creating a fuel-surcharge overhang that pushed LTL and truckload stocks down roughly 30% from their June peaks.
This Summary is generated thanks to a transcription of the interview, for the full interview please enjoy the video above.
