Old Dominion Freight Line saw volumes slip further in August.
The Thomasville, North Carolina-based less-than-truckload carrier reported Thursday a 9.2% year-over-year tonnage decline, which followed an 8.3% decline in July. The August tonnage decline was the combination of an 8.2% falloff in shipments and a 1.2% dip in weight per shipment.
The tonnage declines continued even as the carrier’s prior-year comparisons have gotten easier. (It reported a 6.1% y/y tonnage decline in August 2024.) On a two-year-stacked comparison, Old Dominion’s (NASDAQ: ODFL) tonnage was off 15.3% in August, which was notably worse than the 9.2% decline seen in July and the low-double-digit percentage declines seen last year.
The company continues to focus on yield versus volume through the downturn.
Revenue per hundredweight, or yield, was up 4.5% y/y in the first two months of the third quarter, 4.7% higher excluding fuel surcharges. (The carrier’s yield was up 5.3% y/y in the second quarter.) Old Dominion’s two-year-stacked yield growth has averaged low-double-digit percentage increases over the last several quarters. (Declines in weight per shipment have been a tailwind partially offset by lower lengths of haul.)
“Old Dominion’s revenue results for August reflect the ongoing softness in the domestic economy,” said President and CEO Marty Freeman in a news release. “While our volumes declined on a year-over-year basis, the improvement in our revenue per hundredweight demonstrates the value that our customers realize from our consistent commitment to superior service.”
Table: Company reports
SONAR: Longhaul LTL Monthly Cost per Hundredweight, Class 50-65 Index. Less-than-truckload monthly indices are based on the median rate per ton mile for four National Motor Freight Classification groupings and five different mileage bands. To learn more about SONAR, click here.
Tonnage comps ease but LTL demand remains soft
Looking forward, the carrier’s y/y tonnage comps get easier (negative-8% in the fourth quarter), but the outlook for the U.S. industrial complex as well as consumer spending remains clouded by trade uncertainty.
The Purchasing Managers’ Index (PMI) – a bellwether for manufacturing activity – remained in contraction territory during August at 48.7. (The PMI is a diffusion index in which a reading above 50 indicates expansion while one below 50 signals contraction.) The index has signaled softness in the manufacturing complex in 32 of the past 34 months. The dataset typically leads inflections in LTL volumes by approximately three months.
The PMI new orders subindex – a proxy for future activity – moved into expansion territory (51.4) after six straight months of decline. The index increased 4.3 percentage points from July but remained below 52.1, a level historically needed for a sustained period to garner an increase in manufacturing orders.
“Despite the index’s move into expansion territory, for every positive comment about new orders, there were 2.5 comments expressing concern about near-term demand, primarily driven by tariff costs and uncertainty,” the Tuesday PMI report said.
Old Dominion’s Thursday update didn’t reference its third-quarter margin outlook, which was provided on the second-quarter call in late July.
The company previously said it expects 80 to 120 basis points of sequential degradation to its operating ratio (inverse of operating margin) in the third quarter this year, which is worse than the typical trend of no change to 50 bps of deterioration. The guidance implies a 75.6% OR (at the midpoint), 290 bps worse y/y.
The third-quarter outlook assumes similar revenue trends to those recorded in the second quarter with yields (excluding fuel) 4% to 4.5% higher y/y. The company also flagged higher benefits costs, an annual wage increase, costs from excess network capacity and recent losses on equipment sales as potential detractors.
“Our value proposition remains best in class, and we have the capacity to handle incremental volumes when the demand environment improves,” Freeman said. “As a result, we remain confident that we are the best positioned carrier to win profitable market share over the long term while also improving shareholder value.”
Shares of ODFL were off 4.7% in early trading on Thursday compared to the S&P 500, which was up 0.2%. Shares of LTL peer XPO (NYSE: XPO) were off just 1.3% following the carrier’s Wednesday after-the-market update showing a moderation in tonnage declines during August.
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