The 2025 first quarter could be the operational nadir for less-than-truckload carrier Saia. The company reported sequential improvement in second-quarter financial results on Friday as it appears to have a better handle on costs following a significant expansion to its terminal footprint.
Saia (NASDAQ: SAIA) had 21 more facilities in the second quarter than it did a year ago. The added costs weighed on results as the carrier is still in the process of matching head count to volumes.
The Johns Creek, Georgia-based company reported second-quarter earnings per share of $2.67 before the market opened on Friday. The result was 28 cents ahead of the consensus estimate and 81 cents better than the first quarter.
However, on a year-over-year comparison, EPS was down $1.16, with the bulk of the deterioration tied to startup costs at new locations. Higher interest expense (debt used to fund the terminal purchases pushed net debt $125 million higher y/y) and a slightly higher tax rate combined for a 10-cent drag on the quarter.
Table: Saia’s key performance indicators
Tonnage comps get tougher after 22-month run
Saia reported second-quarter revenue of $817 million, a less than 1% y/y decline but $9 million ahead of analysts’ expectations.
Tonnage increased 1% y/y, the result of a 3% decline in shipments, which was offset by a 4% increase in weight per shipment. On a y/y comparison, tonnage was 4.4% higher in April, down 0.4% in May and off 0.8% in June. Tonnage is flat y/y so far in July.
The y/y comparisons are now more formidable for Saia following 22 consecutive months of gains, which began just ahead of Yellow Corp.’s July 2023 collapse. Saia faces positive y/y comps ranging from mid-single- to low-double-digits for the rest of the year. The remaining third-quarter comps include y/y increases of 8% and 10% in August and September, respectively.
The carrier noted an unfavorable sequential mix shift toward lighter, retail freight at national accounts. (Weight per shipment was down 2% from the first quarter.) Â Also, it had less freight originating in Los Angeles, which pushed length of haul 1% lower sequentially.
Revenue per hundredweight, or yield, was down 2% y/y (1% lower excluding fuel surcharges). The y/y increase in shipment weights was a drag on the yield metric and was only partially offset by a 1% y/y increase in length of haul. The carrier was also up against a plus-9% yield comp from a year ago.
Contacts renewed 5.1% higher on average in the quarter, a step down from the 6.1% average increase in the first quarter. Contract renewals, too, are comping mid- to high-single-digit increases from a year ago.
SONAR: Longhaul LTL Monthly Cost per Hundredweight, Class 50-65 Index. Less-than-truckload monthly indices are based on the median cost per hundredweight for four National Motor Freight Classification groupings and five different mileage bands. To learn more about SONAR, click here.
Operating ratio recovers from post-Covid-worst Q1/25
Saia reported a second-quarter operating ratio (inverse of operating margin) of 87.8%, which was 450 basis points worse y/y, but 330 bps better than the first quarter (the carrier’s worst operating performance since the pandemic). The result was also 120 bps better than management’s guidance.
Cost per shipment was up 7.7% but revenue per shipment increased just 1.8%, a 590-bp negative spread. Cost per shipment was down 4% from the first quarter.
Terminals opened less than three years operated at a mid-90% OR during the second quarter, which was an improvement from breakeven results in the first quarter. Most of the newer locations reported improved efficiency metrics. The new locations have also helped Saia reduce the number of shipment touches across the network.
Salaries, wages and benefits expenses were 260 bps higher y/y as a percentage of revenue. The company implemented an annual wages-and-benefits increase of 4.1% in July 2024 but hasn’t decided if an increase is in store for 2025. Head count was reduced 4.2% from March to June, which should begin to take some pressure off the expense line.
Depreciation and amortization expense was up 130 bps y/y due to recent terminal investments. Purchased transportation expense declined 40 bps y/y.
The company normally sees 100 to 200 bps of OR degradation from the second to third quarter. However, it hopes recent cost actions will allow it to minimize the degradation to just 100 bps this year. The OR guidance could be negatively impacted by roughly 75 bps if it decides to implement an annual compensation increase similar to last year.
The loose guide implies an 88.8% OR in the third quarter, which would be 370 bps worse y/y. The company’s long-term OR goal remains at sub-80%.
In aggregate, Saia has inked deals to buy 31 terminals from defunct Yellow (OTC: YELLQ). Saia now operates a full-scale, national network of 213 terminals.
Shares of Saia were up 5.6% at 2:46 p.m. EDT on Friday compared to the S&P 500, which was up 0.5%.
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