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ODFL | ODFL Q4 operating data underscores softness in US LTL trucking market

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Wed, Dec 6 at 4:16 PM


ODFL Q4 operating data underscores softness in US LTL trucking market​

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ODFL has between 25 and 30% excess capacity in its network, on which the company has spent $2 billion to expand over the past 10 years. Photo credit: Old Dominion Freight Line.
William B. Cassidy, Senior Editor | Dec 6, 2023, 3:55 PM EST

The massive shift of US less-than-truckload (LTL) freight among carriers after thecollapse of Yellow appears to be nearing its end, as the market settles at a new level and Yellow’s terminalsare sold at auction.
The calming market can be seen in fourth-quarter operating data released Wednesday by Old Dominion Freight Line (ODFL), the second-largest US LTL provider and the most profitable publicly traded LTL carrier. ODFL said its daily LTL shipments rose just 0.6% year over year in November.
At the same time, ODFL’s weight per shipment dropped 2.9%, most likely indicating that heavier LTL shipments are being transferred to cheaper-priced truckload carriers, as LTL rates remain elevated after climbing since Yellow’s failure. ODFL implemented a 4.9% general rate increase Monday.

Less-than-truckload costs up 5.9% from August​

US LTL produce price index based on selling prices for trucking services

The massive shift of US less-than-truckload (LTL) freight among carriers after thecollapse of Yellow appears to be nearing its end, as the market settles at a new level and Yellow’s terminals are sold at auction.

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The calming market can be seen in fourth-quarter operating data released Wednesday by Old Dominion Freight Line (ODFL), the second-largest US LTL provider and the most profitable publicly traded LTL carrier. ODFL said its daily LTL shipments rose just 0.6% year over year in November.






At the same time, ODFL’s weight per shipment dropped 2.9%, most likely indicating that heavier LTL shipments are being transferred to cheaper-priced truckload carriers, as LTL rates remain elevated after climbing since Yellow’s failure. ODFL implemented a 4.9% general rate increase Monday.






ODFL’s November data provides a clearer picture of the state of the LTL market – improving gradually, but still soft -- than the clamor surrounding the Yellow auction. With much of Yellow’s freight now reallocated across the LTL sector, carriers will depend on tepid growth in US demand.






The S&P Global purchasing managers index (PMI) for US manufacturing dropped from 50 in October to 49.4 for November, signaling contraction. Manufacturing generates a large share of LTL freight.

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ODFL also said its revenue declined 0.9% on an annualized basis in November.






“The decrease in our November revenue reflects continued softness in the domestic economy,” ODFL CEO Marty Freeman said in a statement Wednesday. “We were pleased, however, to see both the continued improvement in our yield metrics and a slight increase in our LTL shipments.”






The slip in revenue doesn’t mean profits were lower. ODFL’s revenue per hundredweight, a measure of profitability and pricing, rose 7.6% in the first two months of the fourth quarter, excluding fuel surcharges.






LTL pricing also continues to rise, but gains made by carriers in the immediate aftermath of Yellow’s demise are leveling off. The US long-distance LTL producer price index rose 5.9% from July to October, but only rose 0.6% in October itself.



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Yellow distortion​


ODFL has gained shipments from former Yellow customers, but the company’s balance sheet reflects less distortion from Yellow’s failure than seen at other carriers. That’s partly because ODFL turned away much less profitable freight when Yellow shut its doors July 30.






North Carolina-based ODFL, which had $6.2 billion in revenue last year, according to SJ Consulting Group, also was absent from the list of winning or backup bidders at the auction of Yellow’s terminals, which included Top 10 LTL trucking company rivals XPO, Estes, TForce Freight, ArcBest, R+L Carriers and Saia.






Although ODFL had at one point put up a $1.5 billion stalking horse bid for Yellow’s 174 owned terminals, the company recently threw cold water on expectations that it would be a big player in Yellow’s auction. CFO Adam Satterfield told Wall Street analysts during a third-quarter earnings conference call in October that ODFL would take a “strategic” approach to bidding on any Yellow sites.
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In short, other LTL carriers may need that capacity more than ODFL, which tries to always keep at least 20% excess capacity in its network. In the third quarter, ODFL said that percentage was 25% to 30%.

ODFL also is one of at few large LTL carriers that have consistently expanded its capacity over the last decade, adding terminals and doors, while some competitors – notably Yellow -- shrank their networks. The company has opened 42 terminals since 2010, bringing its total to 255 facilities in 2022. ODFL spent $2 billion on network expansion in the last decade, increasing its dock door capacity by 50%.

There’s still time for ODFL to take a “strategic” interest in some of Yellow’s largest terminals. Several major facilities are as yet unauctioned, including a 426-door terminal in Chicago Heights, Illinois.

Contact William B. Cassidy at [email protected]

 
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