Continuing the trend across other modes, US LTL carriers had a very soft Q1, and are generally not optimistic about the rest of 2016, but surprisingly rates moved modestly higher in the period anyway.
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| Old Dominion said that "We have recently noted some increased price competition," but have "not seen signs of broad-based irrational pricing." |
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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 US Truckload Carriers Have Soft Q1, as Freight Volumes, Rates Mostly Down).
Then last week we reviewed results from the four main US publicly traded rail carriers. (See Rail Carriers See Soft Volumes in Q1, but Rates, Efficiency Gains Protect Profits.)
Our pool of publicly traded LTL carriers continues to shrink, after XPO Logistics acquired Conway Freight in mid-2015. XPO does not publish Conway results in enough detail for us to use.
And as s usual, we'll note our 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 second quarter ending Nov. 30, for example - so that comparisons to standard quarters in terms of results for the other carriers doens't work.
Total LTL group revenues in the quarter were down 2.2% in the quarter across the five LTL carriers we follow, though that includes a big drop in fuel surcharge revenues, as diesel prices were again well below levels in Q1 of 2015.
But it was a soft quarter for sure, with average total tonnage in the quarter down 3.3%.
ArcBest, parent of LTL carrier ABF Freight, said it saw a "a sluggish and inconsistent industrial and manufacturing economic environment" in the LTL sector in the quarter, with all the other carriers making similar comments about the state of the freight market.
In fact, just a few weeks ago, American Trucking Associations chief economist Bob Costello said the US was actually in a "freight recession" right now during his comments at the recent 2016 NASSTRAC conference in Orlando.
That soft environment naturally led to a decline in profits, which fell by 38.4% across all the carriers we follow. n fact, the only carrier that improved its net income was WRC Worldwide - and that only by narrowing its loss to $12 million in Q1 from $21.6 million in Q1 of 2015.
Net income as a percent of revenue fell from 3.3% in 2015 to 2.2% in this most recent quarter.
Relatedly, average operating ratios (OR), or operating expense divided by operating revenue, a key metric in the transport sector, rose in the quarter to an average level of 95.8%, versus a better 94.2% last year.
Even generally unstoppable Old Dominion had a tepid quarter, with volumes up just 2.8%, well below its usual growth range, and net income actually fell 3.6%, a real rarity in recent years.
But having said all that, pricing was surprisingly strong.
For example, revenue per hundredweight, a proxy for rates, increased by 3.7% at the national LTL YRC Freight segment, and were up 3.8% at Old Dominion. Saia said it secured average rate increases of 5.3% on contractual renewals in the period.
Below is the full table of US LTL carrier results in Q1.
US LTL Carrier Q1 2016 Results
(See More Below)
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As usual, we provide a few highlights from the earnings releases of each carrier, which were somewhere between the truckload carriers (a lot of commentary) and the rail carriers (very little commentary) in terms of detail.
YRC Worldwide
Had another small quarterly loss (about $12 million) but was basically breakeven on operations, with consolidated operating income of $3.7 million on $1.1 billion in revenue, in is slow, slow recovery.
Said last twelve month (LTM) adjusted EBITDA increased to $337.4 million for a consolidated adjusted EBITDA margin of 7.1%, and was an improvement of $57.0 million from the $280.4 million of LTM adjusted EBITDA in the first quarter of 2015.
Had $19.8 million in capital expenditures and new operating leases for revenue equipment with a capital value equivalent of $33.4 million, for a total of $53.2 million which is equal to 4.75% of operating revenue for the quarter. This total is in line with the $56.4 million of reinvestment in first quarter 2015. The vast majority of the investment was in tractors, trailers and technology.
YRC Freight recently added its new Accelerated service, which allows non-guaranteed shipments to reach their destinations one to two days faster than standard transit times.
Revenue per hundredweight, a proxy for rates, increased by 3.7% at the national YRC Freight in the quarter versus 2015, and was up 2.4% in its regional segment.
"We must balance the volume equation with our strategy to get the right freight at the right price running through our networks. Our intent is to remain disciplined and true to this strategy," said CEO James Welch.
ArcBest/ABF Freight
Said basically breakeven performance reflected "a sluggish and inconsistent industrial and manufacturing economic environment," adding that "Ongoing economic weakness continued to impact our business, consistent with trends that began in the fall of 2015."
However, it added that it is seeing "on-going stability in LTL pricing." Reflective of that, said that its ABF Freight LTL segment saw revenue per hundredweight up in the low-single digit peecentage range,
excluding fuel surcharge.
Also noted the LTL industry saw "excess industry capacity available to move larger-sized shipments."
ArcBest's brokerage business continues to grow, with revenue of $194.7 million compared to $183.7 million in Q1 2015.
Old Dominion
While revenue for a change up only 1.6%, much of that slow growth is attributable to lower fuel surcharge revenues.
Still, company said the operating environment was "challenging."
Said that "While our revenue growth was not as strong as we would have liked, we continue to be encouraged by our ability to win market share in this environment."
Also noted that "The pricing environment was relatively stable during the quarter, as reflected
by the 3.8% increase in LTL revenue per hundredweight, excluding fuel surcharges." But it added that "We have recently noted some increased price competition," but that it had "not seen signs of broad-based irrational pricing."
Old Dominion's net cash provided by operating activities was still a strong $168.4 million for the first quarter, though that was a decrease of 2.4% from the first quarter of 2015.
Saia
Despite the soft freight environment, "LTL revenue per hundredweight increased 2.1%."
In fact, noted that ""Despite no noticeable improvement in the level of general economic activity, we secured average rate increases of 5.3% on contractual renewals in the period."
Roadrunner
Said revenue decreased $23.3 million, primarily due to the decrease in fuel surcharge revenue, which impacted revenue by $19.2 million quarter-over-quarter, and the decline in freight rates and volumes across most end markets.
Also noted that its LTL segment "was impacted by continued weak freight demand."
Roadrunner added that it continues to reduce the number of long haul employee drivers and trucks in favor of more cost effective purchase power and independent contractors.
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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