Old Dominion Freight Line Inc. continues to be on a roll.
The Thomasville, N.C.-based less-than-truckload (LTL) carrier, which has established itself as one of the premier players in all transportation, late yesterday increased its outlook for third-quarter tonnage growth, saying daily tonnage would rise by between 18 and 18.5 percent compared to the same period in 2013. Previously, Old Dominion forecast third-quarter volumes would rise between 17 and 17.5 percent over prior-year results. This marks the third consecutive quarter that Old Dominion has raised its forecasts for tonnage growth during the quarter.
Old Dominion also affirmed its view that third-quarter revenue per hundredweight, excluding fuel surcharges, would increase by 2 to 2.5 percent over the prior-year quarter. Revenue per-hundredweight is a key metric of a LTL carrier's ability to manage its profitability.
Old Dominion said July and August tonnage rose by 18.8 percent and 19 percent, respectively, over the same periods in 2013. Given that September is considered the strongest month of the quarter, it is possible that yesterday's guidance may prove conservative.
In a statement, David S. Congdon, Old Dominion's president and CEO, said the revisions "reflect our ongoing expansion in market share while maintaining our price discipline." Old Dominion's daily tonnage growth has accelerated throughout the year, Congdon said.
Old Dominion's forecasts give industry watchers a more real-time glimpse into LTL market conditions than waiting for the company's quarterly financial results. A pickup in industrial activity, as measured by yesterday's strong August reading on manufacturing from the Institute for Supply Management (ISM), is spurring demand in general for LTL services. Gains in the second quarter came in part from pent-up demand as more traffic was pushed into April and May following inclement winter weather. However, Old Dominion's tonnage results are due as much to the company's ability to grab share as an improvement in macro conditions.
Still, a rising tide appears to be lifting other boats. Darren Hawkins, president of YRC Freight, the long-haul LTL unit of YRC Worldwide Inc., said in a phone interview that the company's volumes would remain strong for the rest of the year. Hawkins added that contract negotiations with large accounts—which represent the bulk of YRC Freight's business—are producing yields that are "well above historical norms."
The surge in second-quarter traffic pulled YRC Freight's physical network out of alignment during the quarter, the company has said. As a result, YRC Freight had to rely more heavily on costly purchased transportation services from the railroads. The network got back in sync around July 4, Hawkins said. In August, the company converted terminals in Houston, Seattle, and Memphis to breakbulk facilities capable of consolidating shipments from satellite terminals and repositioning equipment for outbound service. This network change will increase efficiencies, reduce miles travelled, and improve density, Hawkins said.
Today, purchased rail transportation is used judiciously and not as a reactive measure to protect shipment transit times against the delivery variability of a misaligned network, Hawkins said.
YRC Freight has recently added 2,500 employees, according to Hawkins. Of those 1,000 are drivers and 1,500 are working in dock operations, he said.