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Company earningsLess than TruckloadNewsTrucking

Weather slows Old Dominion’s hot start to year

Momentum in industrial economy is building

Less-than-truckload carrier Old Dominion Freight Line (NASDAQ: ODFL) announced Tuesday that severe winter weather slowed its operations for one week during February. For the month, revenue per day increased 9.2% year-over-year as tonnage climbed 5.9% and revenue per hundredweight, or yield, increased by roughly 3%.

Winter storms during February were a detractor to Old Dominion’s hot start to the year. In January, daily revenue increased 14.6% year-over-year with tonnage climbing 11.9%.

“Old Dominion produced solid revenue growth for February, despite the significant impact from winter weather on our operations,” said Greg Gantt, president and CEO, in a press release. “While we are generally accustomed to the challenges associated with inclement weather, the severity and geographic coverage of the storms during the third week of the month negatively affected revenue and operations for an unusually large number of our service centers.”

Gantt said the company returned to normal operations during the last week of February and that revenue growth was consistent with the January growth rate for each week of the month, except the third.

The February rise in tonnage was the result of weight per shipment increasing 4.1% year-over-year with shipments climbing 1.8%. An increase in weight per shipment is usually a benefit to margins.

Quarter-to-date, yield excluding fuel was up 3.8% year-over-year, slightly lower than the 4.1% mark achieved in January. The company implemented a 4.9% general rate increase on Monday.

By comparison, February was less kind to LTL competitor ArcBest Corp. (NASDAQ: ARCB). The company reported a 6.6% year-over-year increase in tonnage in January, but poor weather caused trends to reverse during February as volumes ended the two-month period flat compared to the same period in 2020.

Revenue per day in ArcBest’s asset-based segment, which includes LTL operations, was up 7% year-over-year through late February, all of which was attributable to an increase in yield.

Chart: LTL contract rates (SONAR: LCWTF.USA)

Industrial economy seeing improvement

The Purchasing Managers’ Index, a survey of manufacturing supply executives, increased 2.1 percentage points sequentially in February to 60.8%. It was the ninth consecutive month the index has signaled growth, a reading above 50%, in the U.S. manufacturing sector.

The manufacturing segment can represent more than 80% of total tonnage for some carriers and LTL volumes historically lag the index by roughly three months.

The new orders index increased 3.7 percentage points from January to 64.8% and the customers’ inventories index remained “too low,” slipping slightly to 32.5% and tying the all-time low. The report noted that optimistic comments from panelists increased to a ratio of 5-to-1 in February from 3-to-1 in January.

Industrial production was up 0.9% sequentially in January with manufacturing output climbing 1%, according to the Federal Reserve. Manufacturing output was up for the fourth consecutive month. Capacity utilization in the industrial sector increased 0.7% sequentially, still 4% below the historical average.

January industrial production was 1.8% lower year-over-year, but the negative comparisons to 2020 are declining from the low- to mid-single-digit declines recorded in prior months.

“With an improving operating environment and domestic economy, we believe we can win additional market share by continuing to deliver superior service at a fair price. As we anticipate additional growth in volumes, we are focused on expanding the capacity of both our workforce and our service center network,” Gantt said in conclusion.

Old Dominion previously announced that it would add nine terminals in 2021 after adding a similar number in 2020.

Shares of ODFL are off slightly in early trading.

Click for 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.