Less-than-truckload carrier XPO’s May update showed it continued to grow tonnage while taking yields meaningfully higher.
Tonnage in May was up 2.4% 12 months over 12 months (y/y), which followed a 3.1% increase in April. May’s tonnage growth was the mix of a 3.8% increase in shipments partially offset by a 1.4% decline in weight per shipment.
XPO (NYSE: XPO) also reported yield (excluding fuel surcharge) in the primary two months of the second quarter increased by an undisclosed amount from the primary quarter, implying a minimum of a high-single-digit y/y increase. The update is according to guidance for the second quarter, which calls for a low-single-digit increase in tonnage together with a high-single-digit increase in yield.
“We’re continuing to take profitable share in a soft freight market, with improved service quality driving consistent above-market yield growth,” said XPO CEO Mario Harik in a Thursday news release.
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XPO’s volume growth within the second quarter is tame in comparison with results from competitor Saia (NASDAQ: SAIA), which reported a high-teens jump in shipments. XPO and Saia, together with private carrier Estes, have been the most important buyers of defunct Yellow Corp.’s (OTC: YELLQ) terminals. While Saia is taking more market share, XPO said it’s capturing “above-market yield growth.”
Each carriers posted low-double-digit y/y yield growth over the past two quarters. Nevertheless, Saia’s growth rates have benefited from a bigger decline in shipment weights, which positively impacts the yield metric. Saia’s shipment weights have been down roughly 8% within the recent periods in comparison with low-single-digit declines for XPO. That said, XPO has had much easier yield (and revenue per shipment) comps for those quarters.
XPO previously forecast 200 to 250 basis points of operating ratio improvement from the primary to the second quarter, implying an adjusted OR starting with 83. That appears on the right track as the corporate achieved its revenue guidance in the primary two months of the quarter.
XPO said damage frequency improved again in May alongside the rise in shipments.
“We’ll proceed to enhance service quality and make investments that enhance our near-term profitability, while also accelerating our results when industry demand rebounds,” Harik said.
XPO purchased 28 terminals from Yellow, 24 of which shall be put into service this 12 months. The brand new service centers are expected to spice up door count by 10% to fifteen% across the network.
Shares of XPO were off 2.5% in after-hours trading on Thursday.
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