Less-than-truckload carrier Old Dominion Freight Line said Monday that there was no seasonal demand uptick in May, reporting volume metrics that were just a little worse than those reported in April when factoring within the prior-year comparisons.
Old Dominion (NASDAQ: ODFL) reported tonnage was down 14.4% yr over yr (y/y) in May, which followed a previously disclosed decline of 14.5% in April. The tonnage declines were the results of every day shipments dropping between 11% and 12% y/y in every month, with weight per shipment sliding 3%.
While the y/y tonnage declines were similar in each months, the May comp (up 2.3% y/y in 2022) was 410 basis points easier than the April comp (up 6.4%).
Extrapolating the y/y declines, the carrier has seen tonnage dip roughly 2% from the primary quarter, which is often the weakest quarter for freight demand annually. The identical math implies shipments are flat with the primary quarter. By comparison, Old Dominion normally sees a 2% to three% increase in shipments from April to May and one other 2% sequential bump in June.
The y/y downward volume trends have also accelerated from the primary quarter, by which shipments were off 10% and tonnage was down 12%.
For the primary two months of the 2023 second quarter, every day revenue was down by a midteen percentage y/y. If the trend holds, the carrier will see revenue fall 1% sequentially from the primary quarter, a stretch by which it normally records a ten% increase.
Nonetheless, the amount comps proceed to ease for Old Dominion. Tonnage was flat y/y last June, turning negative in July, with the declines accelerating through the top of the yr.
“Old Dominion’s revenue results for May reflect continued softness within the domestic economy in addition to a decrease in fuel surcharge revenue,” President and CEO Greg Gantt stated in a Monday evening news release. “While our volumes decreased on a year-over-year basis, our LTL shipments per day remained relatively consistent with the primary quarter of 2023 and our yield continued to enhance.”
The corporate was up against tough revenue comps from a yr ago because it recorded a y/y topline increase of 29% in April 2022 and a 26% increase the next month.
To date within the quarter, average weekly diesel prices are roughly 27% lower y/y.
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Old Dominion holds line on yields
The carrier noted on its first-quarter conference call in late April that it was holding the road on pricing and because of this losing market share to lower-cost carriers. Stacking the amount comps for the past two years shows the corporate’s tonnage was down 8.1% in April and 12.1% in May.
Management said some shippers were moving freight on a short-term basis to fulfill internal budgets and that in past cycles freight lost to a competitor often finds its way back to the network relatively quickly.
Quarter thus far, revenue per hundredweight was up 0.1% y/y, 7.9% higher excluding fuel surcharges.
“Our quarter-to-date LTL revenue per hundredweight, excluding fuel surcharges, increased 7.9% due primarily to the continuing execution of our yield-management strategy,” Gantt said. “As we proceed to deliver our unmatched value proposition, and consistently execute on the opposite key elements of our long-term strategic plan, we imagine we are going to win market share and increase shareholder value over the long run.”
Competitor Saia (NASDAQ: SAIA) reported rather more muted volume weakness on Friday. The carrier reported y/y tonnage declines of 1% and a couple of%, respectively, in April and May. It doesn’t provide any revenue-based metrics in its intraquarter updates.
Old Dominion normally sees 200 bps of sequential operating ratio (expenses expressed as a percentage of revenue) improvement within the second quarter annually, but management said on the first-quarter call that the margin would likely be flat if volumes didn’t improve.
Shares of ODFL were off 1.2% in after-hours trading on Monday, following a 1.9% decline through the day’s session. The S&P 500 was off just 0.2% on Monday.
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