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Supply Chain News: Have and Have Nots in LTL Sector in Q1, as Old Dominion and Saia Look Strong

 

YRC and ARCBest Post Losses, while Old Dominion and Saia Show Strong Profitability

May 26, 2017
SCDigest Editorial Staff

Joining the truckload carriers we follow before them, the US less-than-truckload (LTL) sector was hit with a soft fright environment in Q1, but Old Dominion and Saia nonethless posted strong results, while YRC Worldwide and ARCBest struggled.

Supply Chain Digest Says...

Rates seemed to be up in low low single digits. YRC, for example, noted that "The pricing environment remains stable in the less-than-truckload sector."

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We're back as usual every quarter with our review of the results and trends across freight modes, starting two weeks ago week with US truckload carriers (see Yet Another Soft Quarter for US Truckload Carriers in Q1, as Volumes, Rates Remain Weak).

Then last week we reviewed results from the four main US publicly traded rail carriers. (See US Rail Carriers See Strong Volume, Profit Growth in Q1.)

And as usual, we'll note our LTL analysis does not include two of the largest LTL providers - UPS and FedEx - because neither UPS nor FedEx breaks out their numbers in a way that allows the LTL portion to be isolated out from other freight business such as truckload carriage (FedEx) and supply chain services (UPS).

In addition, FedEx runs an unusual fiscal calendar - with its first quarter ending Aug. 31, for example - so that comparisons to standard quarters in terms of results for the other carriers doesn't work well.

 

After having added Roadrunner Transportation to our group last year, given its substantial LTL business (mostly as a broker), they are off our list for a second straight quarter, having not yet released Q1 earning amid accounting issues.

Total LTL group revenues in the quarter were up 5.6% across the four LTL carriers we follow, with help from an an increase in fuel surcharge revenues.

But it was a fairly soft quarter for sure, with average total tonnage per day in the quarter basically up for most of the carriers in the 2-3% range.

 

In terms of profits, Old Dominion's net income rebounded in the quarter, up 9.1%, while Saia saw profts tise 7.7%. Meanwhile, YRC Worldwide fell into the red in Q1, with a small loss of $3 million in the quarter, while ARCBest lost $7.4 million.

 

But of overall LTL group net profits of about $66 million, Old Dominion delivered $65 million of that total.

 

Net income as a percent of revenue was down a bit from 2016, at 2.7% from 3.1% last year, as the LTL sector remains not very profitable, as has been the case for decades.

 

Average operating ratios (OR), or operating expense divided by operating revenue, a key metric in the transport sector, rose just a bit, at an unweighted average of 96.0% versus 95.3% in 2016. However, that masked big differences between carriers, with Old Dominion having an OR of just 85.7%, and Saia at 94.5%, while ARCBest/ABF Freight and YRC both came in over 100% - not good.

 

Old Dominion's saw strong top line growth again after several uncharacteristically slow quarters, with revenue up 9.1%. As usual, its results were still far superior to the other LTL carriers, with net income of 8.7%% of revenues, compared to next best of just 3.6% by Saia.

 

Rates seemed to be up in low low single digits. YRC, for example, noted that "The pricing environment remains stable in the less-than-truckload sector."

 

Below is the full table of US LTL carrier results in Q1.

 

US LTL Carrier Q1 2017 Results

 

 

Source: SCDigest from Carrier Earnings Releases

 

(See More Below)

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As usual, we provide a few highlights from the earnings releases of each carrier, which were very brief in Q1.

 

YRC Worldwide

Continues to report based on its national Freight unit and its Regional unit.

Noted that "YRC Freight's results in the first quarter were unfavorably impacted by a year-over-year decrease in revenue per hundredweight," and that "We expect the improvement in year-over-year tonnage per day to help us execute our strategy of pricing for profitability and moving shipments through YRC Freight, Holland, Reddaway and New Penn's networks that have favorable freight characteristics."

Excluding fuel surcharge, revenue per hundredweight decreased by 1.7%, while at its Regional segment the same measure was basically flat, up 0.2%.

Said that "The pricing environment remains stable in the less-than-truckload sector."

The quarter included layoffs. YRC said in Q1 implemented "a plan to reduce costs and de-layer our management and other non-union workforce. Headcount reduction is the most significant source of savings while other changes included increasing collaboration across our companies and reducing the utilization of external professional services."

The number of layoffs is about 180 positions.

Still in a somewhat precarious financial position, YRC burned through $26 million in cash from operations in
the quarter.

ARCBest/ABF Freight

Said that the company's enhanced market approach, in which it now offers most services under the ArcBest brand, became fully operational in the first quarter.

Said that its billed revenue per hundredweight excluding fuel surcharges was up in the low single digit percentages.

Noted that "We remain cautiously optimistic that the 2017 operating environment will improve going forward."

Old Dominion

Said revenue growth was driven by a 4.9% increase in LTL revenue per hundredweight, a proxy measure for rate changes.

Had on-time deliveries of more than 99% and a company record cargo claims ratio of 0.2% in the quarter.

Old Dominion continues to expect capital expenditures for 2017 to total approximately $385 million, including planned expenditures of $185 million for real estate and service center expansion projects, $155 million for tractors and trailers, and $45 million for technology and other assets.

Saia

Said Q1 was a busy period for the company, as "our plan for expansion into Pennsylvania and New Jersey kicked into high gear."

Added that "These are the first steps in our multi-year strategy of becoming a 48-state LTL service provider."

The company currently plans net capital expenditures in 2017 of approximately $220 million.

Any reaction to the Q1 results and trends from the LTL carriers? Let us know your thoughts at the Feedback section below.

 

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