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Old Dominion update points to strong Q2

Intraquarter report shows continuation in positive streak for LTL carriers

An Old Dominion rig pulling a double trailer. (Photo: Jim Allen/FreightWaves)

Old Dominion Freight Line announced Monday that revenue increased 26% year-over-year on a per-day basis in May. The carrier previously disclosed a 29.1% increase for the month of April. The report continues a string of positive second-quarter updates from less-than-truckload carriers.

Tonnage was up 2.3% in May at Old Dominion (NASDAQ: ODFL), following a 6.4% rise in April but higher yields drove the bulk of the revenue jump. Through the first two months of the quarter, revenue per hundredweight was 22.4% higher year-over-year including fuel surcharges and 9.6% higher without.

Table: Company reports

“Old Dominion’s revenue growth exceeded 20% for both April and May of 2022, as customer demand has remained steady throughout the second quarter,” Greg Gantt, president and CEO, stated in a press release. “The consistency in demand for our superior service has allowed us to improve our yields while also supporting our market share initiatives.”

Other carriers are seeing similar trends.

On Thursday, ArcBest (NASDAQ: ARCB) reported that the company’s asset-based division, which includes LTL, reported a 24% increase in daily revenue during May following a similar increase in April. The same day Saia (NASDAQ: SAIA) said tonnage was up 5.3% year-over-year in May, following a 2.3% increase in April. Saia does not provide revenue metrics in its intraquarter updates.

The recent moderation in tonnage growth rates speaks to the tough comps created from a volume surge a year ago. On a two-year stacked basis, tonnage is up by a high-20% to high-30% range at these companies in the second quarter. And yields continue to swell, although some of that is tied to higher fuel prices.

Chart: (SONAR: LCWTF.USA) – Final reporting of LTL rates. Seven-day moving average of daily median rate per 100 pounds. Reported on a 42-day lag. To learn more about FreightWaves SONAR, click here.

Deutsche Bank (NYSE: DB) analyst Amit Mehrotra commented in a Monday email to clients that strong pricing trends for the industry are likely to continue. The LTL industry is heavily consolidated, with several large players accounting for the bulk of market share. The dynamic has allowed the group to improve freight selection and remain disciplined on price.

During the first quarter, the publicly traded LTLs reported contractual rate increases of approximately 10%, a number that again looks achievable during the second quarter.

Mehrotra said carriers are doing a much better job collecting incremental revenue for shipments that require accessing hard-to-reach or residential locations, and they have been successful enforcing special charges for things like detention time or liftgate usage.

“The bottom line is the conversation and debate around LTL companies is much too cycle-focused, in our view, with little appreciation for the hard work the industry has done to enhance and sustain its pricing power,” Mehrotra stated.

The industrial sector continues to remain firm, which is supportive of LTL freight demand. The Manufacturing Purchasing Managers’ Index registered a reading of 56.1% in May, a 70-basis-point increase from April. The data set has remained above 50% for two full years now, a level indicative of growth in the U.S. manufacturing sector.

“We believe we can continue to win market share over the long term and, as a result, we remain fully committed to the same long-term strategic plan that has guided us for many years,” Gantt continued. He said the company will continue to add equipment, terminals and workers “to help ensure that the necessary elements of capacity are in place to support our anticipated volume trends.”

More FreightWaves articles by Todd Maiden

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.