Operating metrics for less-than-truckload carrier Old Dominion Freight Line saw a pointy inflection in August compared to July. The corporate attributed the change to the shutdown of Yellow Corp.
Revenue per day was down just 1.4% yr over yr (y/y) in August in comparison with a 13.3% decline in July. Throughout the downturn, Old Dominion (NASDAQ: ODFL) has been more protective of yields than most carriers. It has resisted lowering rates to maintain freight in its network.
Old Dominion’s tonnage was down 6% y/y in August following an 11.1% decline in July. Each months were higher than the 14.1% decline within the second quarter. Management noted “continued softness within the domestic economy” in a Wednesday news release but said shipments were up 6% sequentially in August to 50,000 per day. The carrier handled roughly 47,000 shipments every day for the primary seven months of the yr.
“This incremental increase is due partially to the direct and indirect impact of considered one of our largest competitors ceasing operations in July, as we consider underlying demand has remained relatively consistent,” stated Marty Freeman, Old Dominion president and CEO.
Industrial freight accounts for two-thirds of total volumes for many carriers.
The Manufacturing Purchasing Managers’ Index remained in contraction territory for a tenth straight month in August. A 47.6 reading was 1.2 percentage points higher than the July reading but below the neutral threshold of fifty. Index components like latest orders (46.8) and order backlog (44.1) remained in decline through the month.
Old Dominion’s revenue per hundredweight, or yield, was up 1.8% for the primary two months of the third quarter (8.8% higher excluding fuel surcharges). Yield growth accelerated from July to August because the carrier previously reported a 7.4% y/y increase in yield (excluding fuel) during July.
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The corporate previously said it was unsure how much freight it will get following the capability shakeup but did say it expected to win share from other competitors that onboarded Yellow’s freight too fast. The rationale was that the fast influx of volume in other carrier networks would negatively impact service levels and send shippers trying to find higher options. As such, the full impact from Yellow’s closure could take longer to play out for Old Dominion.
By comparison, carriers ArcBest (NASDAQ: ARCB), Saia (NASDAQ: SAIA) and XPO (NYSE: XPO) have experienced more notable increases.
ArcBest said shipments at its core accounts have improved roughly 20% since June (up just 3% in total during August).
Saia provided an update to August results on Wednesday, which showed some acceleration in volumes because the month progressed. Shipments within the month were 14.2% higher y/y versus up 13% in the primary two weeks of the month. Tonnage increased 6.8% y/y in August, following a 3.4% increase in July.
Tonnage trends should improve more meaningfully for Old Dominion within the last 4 months of the yr. Like most other carriers, Old Dominion’s volumes turned negative at the tip of last summer with the declines accelerating through the tip of the yr.
Old Dominion recently entered a $1.5 billion stalking horse bid on roughly 170 of the terminals Yellow owns. The offer will set a floor for valuation on Yellow’s properties because it liquidates assets in bankruptcy. Old Dominion may find yourself with just a number of of the sites because the locations might be marketed and could possibly be sold to higher bidders. The winners of Yellow’s terminals are expected to be revealed in October.
On its quarterly call at the tip of July, Old Dominion’s management said it had roughly 30% excess capability, which was 5 percentage points higher than normal.
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