Todd Maiden
3 min read
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Less-than-truckload carrier Old Dominion Freight Line saw “continued softness” in May as revenue per day fell 5.8% year over year. Lower volumes were again only partially offset by higher yields. The trend is a continuation from what was experienced in April and during the first quarter.
Old Dominion (NASDAQ: ODFL) reported an 8.4% y/y decline in tonnage per day during May as shipments fell 6.8% and weight per shipment was down 1.9%. The carrier’s April tonnage was off 8.8%, which followed a 6.3% decline in the first quarter.
The monthly tonnage declines continue to moderate on a two-year-stacked comparison. May tonnage was down 6.9% (down 6.5% in April), which is an improvement from the low-double-digit declines recorded last year and into the first quarter.
A prolonged freight downturn and a sagging industrial sector have weighed on LTL demand.
The Purchasing Managers’ Index (PMI) – a bellwether for manufacturing activity – remained slightly in contraction territory during May at 48.5. The index has been underwater in 29 of the past 31 months. The PMI dataset typically leads inflections in LTL volumes by approximately three months.
The PMI new orders subindex – a proxy for future near-term activity – improved slightly but remained in decline at 47.6. The new export orders subindex continued to see the overhang of tariffs, falling into “extreme contraction” at 40.1.
The LTL industry continues to capture rate increases despite the demand malaise.
Old Dominion said revenue per hundredweight, or yield, was up 3.2% y/y for the first two months of the second quarter (5.6% higher excluding fuel surcharges). The dip in average shipment weight modestly benefited the metric.
Retail diesel fuel prices were off 8.5% y/y in May following an 11% decline in April. A sliding fuel surcharge scale makes higher diesel prices incrementally more accretive to LTL carrier margins but presents a headwind when fuel prices are falling.
“We believe that our market share has remained relatively consistent throughout this extended period of economic softness, despite the year-over-year decrease in our LTL volumes,” Old Dominion President and CEO Marty Freeman said in a Wednesday news release. “Customers have continued to value our industry-leading service, which supports our ongoing yield management initiatives.”
The company previously guided to second-quarter revenue of approximately $1.4 billion (a 7% y/y decline, or a 5% decline on a per-day basis) assuming April’s volume and yield trends held throughout the quarter. That outlook included a 5% to 5.5% increase in yield (excluding fuel), which is in line with the actual result seen during the two months.
