Just like other less-than-truckload carriers, XPO saw a notable year-over-year (y/y) improvement in volumes in February compared to January.
In a Tuesday update following the market close, the carrier said tonnage grew 3.5% y/y in February as a 5.8% increase in shipments was partially offset by a 2.2% decline in weight per shipment. The tonnage increase was an improvement from a modest decline in January.
Further, XPO (NYSE: XPO) was facing tougher tonnage comps than most peers. When stacking January and February growth rates for the past two years, XPO’s tonnage was up roughly 1.5% in every month, which was largely consistent with Saia Inc. (NASDAQ: SAIA) and well ahead of double-digit declines at Old Dominion Freight Line (NASDAQ: ODFL).
XPO doesn’t provide revenue-based metrics in its intraquarter updates. The corporate guided to a roughly 10% y/y increase in yield (excluding fuel surcharges) for the primary quarter during its fourth-quarter call a month ago.
Full-year guidance calls for yields to be up by mid- to high-single digits, with tonnage up by low-single-digits. Those forecasts are usually not depending on a cloth positive inflection within the broader economy, management said.
Modest declines in weight per shipment have been a positive catalyst for yields.
Much is left to be determined in the primary quarter, nevertheless, because the month of March typically accounts for half of the carrier’s quarterly result.
XPO normally sees 40 basis points of decay in its operating ratio from the fourth to the primary quarter but plans to raised that level this 12 months. That means an analogous OR to the 86.5% result it produced within the fourth quarter, which could be roughly 300 bps higher y/y.
For the total 12 months, its OR is anticipated to enhance by a complete of 150 bps to 250 bps.
XPO recently acquired 28 terminals valued at $870 million from bankrupt Yellow Corp. (OTC: YELLQ). The additions will bring roughly 3,000 latest doors to its network, 1,000 of which can not be incremental.
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