Saia kicked off a year in which it expects to grow by as many as 15 new terminals with first-quarter earnings that set several records, and with an outlook toward the balance of 2022 that sees the strong freight market mostly continuing.
In a quarter in which numerous truckload and LTL carriers have boasted about achieving revenue milestones, Saia (NASDAQ: SAIA) said its first-quarter revenue of $661.2 million was a record, as was its operating ratio of 84.4% compared to 89.9% a year earlier.
All other key metrics for an LTL carrier were up as well. The key yield number of revenue per hundredweight excluding fuel rose 14.35% for the quarter, up to $19.28 from $16.86. Tonnage was up 11.2%, shipments rose 7.5% and revenue per shipment excluding fuel rose a strong 25.7%.
Net income of $2.98 a share came in 26 cents above consensus, according to Seeking Alpha. Revenue of $661.2 million was $27.4 million was more than consensus.
In its earnings call with analysts, CEO Frederick Holzgrefe said if markets continue to trend the way the company has seen so far in 2022, Saia expects to have full-year OR improvement of 200 basis points. The company recorded an OR of 85.4% for full-year 2021, and the first quarter already was less than that level.
The CEO also downplayed forecasts of a significant contraction in the freight market. “Pricing remains stable, and in recent shipper surveys, customers have a positive business outlook over the next several months,” Holzgrefe said. He said significant increases in truckload or LTL capacity are not expected.
On the call, CFO Douglas Col said March shipments were up 2.2% and tonnage was up 4.2%. But the April comparisons to last year were up just “slightly.” Revenue growth for April was up mid-20%, he said, adding that yield figures are not disclosed on a monthly basis.
Holzgrefe made reference on the call several times to seeing a gap between Saia’s performance and that of other major LTL carriers, though he did not identify any by name. But by way of comparison, the OR at Old Dominion Freight Line (NASDAQ: ODFL) for the quarter was 72.9%. “Although we had a great quarter, we have a ways to go to reach parity with some of the other elements of the market,” he said.
Holzgrefe, in response to an analyst’s question, said Saia had achieved contract pricing renewals of 10.2% during the quarter. “We feel good about that,” he said. But he added that number was not the end of the process, and that in recent quarters, performance has exceeded the number on the renewals.
With Saia looking at 10 to 15 new terminals this year, Holzgrefe was asked whether the process could be pulled back if the market did not support that level of growth.
The CEO said Saia is pursuing a mostly organic growth strategy, rather than expanding through acquisitions. “The thing we like about organic growth is we’re in control of regulating it up or down if there was a scenario in which we didn’t feel comfortable executing,” he said.
Saia opened two new terminals in the first quarter, one near Chicago and the other near Parkersburg, West Virginia. It opened seven new terminals in 2021. In the prepared statement released with the earnings, Holzgrefe said he anticipates four terminal openings this quarter.
In a note to investors, the transportation research team at Deutsche Bank led by Amit Mehrotra said the first-quarter performance at Saia was “solid” and that all signs point to the company having “an unabated pricing opportunity.”
One number in the Saia earnings that stood out was its expenses for purchased transportation, which rose to $70 million from $44 million. That number led Mehrotra to say that Deutsche Bank believes that “underlying profitability is higher than the 84.4% OR SAIA has reported when adjusting for much higher purchased transportation costs … which we believe is more cyclical than the pricing gains.”
Todd Fowler, an analyst with KeyBank, said in his analysis of the earnings that while the purchased transportation component of the business may have been up, salaries and wages as a percentage of revenue came in at 43.8% of revenue, less than the 44.3% that KeyBank had estimated.
Holzgrefe made several references during the analysts’ call to service levels being an advantage at Saia, and Mehrotra largely echoed that. “The company also noted that its expansion allows for ‘better coverage and a premium level of service,’ and we have long believed service is the key that unlocks sustainability pricing power [over inflation],” Deutsche said in its analysis.
“We focus on the customers first, and that allows us to push the pricing around that,” Holzgrefe said on the call.
Another notable number on the company’s balance sheet: Cash on hand at the end of the quarter was $141.3 million. A year earlier, it was $53.3 million. Debt dropped to $4.9 million from $66 million a year ago.
Saia had a rip-roaring stock performance in 2021, rising almost 61%. But in the past month Saia stock is down 14.6%, and is down 33.2% for the past three months.
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