Less-than-truckload carrier Old Dominion Freight Line noted “continued softness” in demand during February but said shipment trends have likely stabilized.
February tonnage was down 12.4% year over year (y/y), which was the combination of a 10.1% drop in shipments and a 2.5% dip in weight per shipment. Old Dominion (NASDAQ: ODFL) previously reported a 7.8% y/y decline in tonnage for the month of January.
At first blush it looks like the volume declines may be accelerating, however, weather and prior-year comparisons created some noise.
Across the industry, winter storms at the end of December pushed more freight into the month of January, providing an artificial bump to results. Also, the January tonnage comp (up 7.7% y/y in January 2022) was tame compared to the February comp (up 18.3%). All in, the first quarter will likely be no worse than the 9.1% y/y tonnage decline booked by the carrier in the fourth quarter.
Similar trends were reported by LTL competitor Saia (NASDAQ: SAIA), which provided a first-quarter update on Thursday.
It’s also worth noting that the declines come after nearly two years of volume increases, which propelled the industry to new highs.
“Old Dominion’s revenue results for February reflect continued softness in the domestic economy,” Greg Gantt, president and CEO, stated in a news release. “While our revenue decreased on a year-over-year basis, we believe our LTL shipments per day have largely stabilized and our yield continued to improve.”
Revenue per day was down 2.9% y/y in February, which followed a 4.2% increase in January. The revenue comps were tough for both periods, with February (revenue up 38.3% y/y in February 2022) facing the more difficult of the two (up 25.7% y/y in January 2022).
When stacking the last three January-February periods, the carrier’s daily revenue is 45% higher.
While demand sagged, yield metrics stepped higher. For the first two months of the quarter, revenue per hundredweight was up 12.1% y/y, 8.6% higher excluding fuel surcharges. The increase in yield is on top of 16.8% growth in the same period of 2022.
Old Dominion has been one of the more bullish LTL carriers regarding the outlook for 2023. While most have signaled the likelihood of a back-half inflection in demand, Old Dominion maintained its view that volumes could turn as soon as this spring on its fourth-quarter call with analysts.
However, that forecast faces a slowing in industrial demand.
Institute for Supply Management data showed a fourth straight month of contraction in manufacturing activity during February. The Manufacturing Purchasing Managers’ Index displayed a reading of 47.7, below the neutral level of 50. Index components like new orders, production and order backlog continued to contract during the month.
Old Dominion said Wednesday that its head of sales, Greg Plemmons, will take over as the company’s EVP and chief operating officer effective July 1. He will succeed Marty Freeman, who will become president and CEO at the same time.
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