Less-than-truckload carriers are still seeing negative tonnage results at what is likely the bottom of the cycle. XPO and Old Dominion Freight Line are the latest to provide November results after updates from a pair of carriers sent shares for the group lower on Tuesday.
XPO eyeing Q4 margin improvement
XPO (NYSE: XPO) reported a 4% y/y decline in tonnage per day during November, which followed an 8% decline in October. October was up against a tough comp due to a cyberattack at Estes last year that briefly pushed volumes and rates higher throughout the industry.
On its third-quarter call on Oct. 30, XPO said the Estes impact resulted in 1,000 additional shipments per day last year, creating a 2-percentage-point headwind in October 2024. The implication is that tonnage was likely off 6% y/y excluding the impact.
The November tonnage result was the combination of a 4.2% y/y decline in shipments, which was partially offset by a 0.2% increase in weight per shipment.
On a two-year-stacked comparison, XPO’s tonnage was down 5.5% in October and 4.5% in November. It faces a tough December tonnage comp (up 3.6% y/y in December 2023) but didn’t alter its fourth-quarter guidance, which calls for just a mid-single-digit decline. That outlook was predicated on normal seasonal trends holding throughout the quarter.
XPO’s tonnage per day declined 3.9% y/y during the third quarter.
The company doesn’t provide revenue or pricing metrics in its intraquarter updates.
XPO’s adjusted operating ratio (inverse of operating margin) improved 200 bps y/y in the third quarter while other carriers saw degradation. The company credited service-related and other pricing opportunities, as well as a change in freight mix to include more business from local accounts, as the drivers of OR improvement.
It normally sees 250 bps of margin erosion from the third to the fourth quarter but expects to outperform that sequential change rate this year. That would put it close to an 86% OR for the fourth quarter, which would be a y/y improvement compared to other carriers that are forecasting roughly 200 to 500 bps of y/y margin degradation in the quarter.
XPO has opened 21 of the 28 terminals it acquired from Yellow Corp. (OTC: YELLQ). The remaining locations will open early next year. The new sites will boost door count by 10% to 15% and give the carrier roughly 30% additional capacity across the network, which it has said is required to improve service and to take share when the market turns.
Old Dominion awaits market inflection
Old Dominion Freight Line (NASDAQ: ODFL) reported an 8.2% y/y decline in revenue per day during November. The result was a modest improvement from a 10.9% decline in October. Again, October had a tougher comp given the outage at Estes last year and the hurricanes this year.
The November revenue decline was the result of an 8% y/y decline in tonnage per day along with a slight dip in revenue per hundredweight, or yield. Yield is off 1.2% y/y through the first two months of the fourth quarter but is 3.7% higher excluding fuel surcharges.
Shipment weights were off modestly but not overly impactful to yields.
“Our revenue results for November reflect the continued softness in the domestic economy as well as the impact of lower fuel surcharge revenue on our yields,” said President and CEO Marty Freeman in a news release. “While our LTL volumes declined on a year-over-year basis in November, the improvement in our revenue per hundredweight, excluding fuel surcharges, demonstrates our continued commitment to yield management.”
Retail diesel prices were off 18% y/y on average in the first two months of the fourth quarter.
Old Dominion’s yield excluding fuel was 3.2% higher y/y in October.
The y/y tonnage declines have accelerated from the third quarter’s 4.8% decline, but the comps have gotten tougher.
On a two-year-stacked comparison, Old Dominion’s daily tonnage was off 11% in October and 10.3% in November. The carrier’s y/y comps ease slightly in the first quarter.
On its third-quarter call in October, the company said October marked the first time it had been close to normal seasonality since the downturn began. It also said fourth-quarter revenue could be down between 6% and 10% y/y depending on how closely volumes track to historical seasonal trends.
Old Dominion previously forecast 300 to 350 bps of sequential OR deterioration in the fourth quarter, which would be 100 bps worse than the normal change rate. The carrier is carrying 30% excess capacity throughout its network in anticipation of a recovery. The guide implies a 76% OR, roughly 420 bps worse y/y.
Shares of ODFL were off 1.9% in early trading Wednesday while XPO was down 1%. The S&P 500 was up 0.3%.
