Less-than-truckload carrier XPO’s May update showed it continued to grow tonnage while taking yields meaningfully higher.
Tonnage in May was up 2.4% year over year (y/y), which followed a 3.1% increase in April. May’s tonnage growth was the combination of a 3.8% increase in shipments partially offset by a 1.4% decline in weight per shipment.
XPO (NYSE: XPO) also reported yield (excluding fuel surcharge) in the first two months of the second quarter increased by an undisclosed amount from the first quarter, implying at least a high-single-digit y/y increase. The update is in line with guidance for the second quarter, which calls for a low-single-digit increase in tonnage along with a high-single-digit increase in yield.
“We’re continuing to take profitable share in a soft freight market, with improved service quality driving consistent above-market yield growth,” said XPO CEO Mario Harik in a Thursday news release.
XPO’s volume growth in the second quarter is tame compared to results from competitor Saia (NASDAQ: SAIA), which reported a high-teens jump in shipments. XPO and Saia, along with private carrier Estes, have been the biggest buyers of defunct Yellow Corp.’s (OTC: YELLQ) terminals. While Saia is taking more market share, XPO said it is capturing “above-market yield growth.”
Both carriers posted low-double-digit y/y yield growth over the past two quarters. However, Saia’s growth rates have benefited from a larger decline in shipment weights, which positively impacts the yield metric. Saia’s shipment weights have been down roughly 8% in the recent periods compared to low-single-digit declines for XPO. That said, XPO has had much easier yield (and revenue per shipment) comps for those quarters.
XPO previously forecast 200 to 250 basis points of operating ratio improvement from the first to the second quarter, implying an adjusted OR starting with 83. That appears on track as the company achieved its revenue guidance in the first two months of the quarter.
XPO said damage frequency improved again in May alongside the increase in shipments.
“We’ll continue to improve service quality and make investments that enhance our near-term profitability, while also accelerating our results when industry demand rebounds,” Harik said.
XPO purchased 28 terminals from Yellow, 24 of which will be put into service this year. The new service centers are expected to boost door count by 10% to 15% across the network.
Shares of XPO were off 2.5% in after-hours trading on Thursday.
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