Geofencing data: Less-than-truckload boost carries into June

Less-than-truckload (LTL) volumes continued to improve throughout May and into the first week of June, said Deutsche Bank (NYSE: DB) analyst Amit Mehrotra in a note to clients.

He reported that in the first week of June, LTL activity levels improved 7% versus the average levels seen in May and were up 8% compared to the last week of May. Mehrotra believes that Old Dominion Freight Line (NASDAQ: ODFL) and SAIA (NASDAQ: SAIA) outperformed the average increase and UPS (NYSE: UPS) and YRC Worldwide (NASDAQ: YRCW) underperformed.

The investment firm has mapped approximately 1,000 LTL service sites, providing it with a high-frequency geolocation dataset for the LTL industry. The geofencing data covers all regions for major public and private LTL carriers, including all of Old Dominion’s more than 200 facilities. The week-by-week analysis evaluates shipment trends for both regional and national carriers. The note said that the firm hasn’t mapped XPO Logistics’ (NYSE: XPO) facilities yet.

The regional data showed “sharp inflections.” The Midwest saw activity improve 19% and the Northeast climbed 28% in the first week of June compared to the last week of May. The data shows that activity “stabilized at lower levels” in the Southwest.

The PMI, a survey of manufacturing supply executives, jumped 9.5 percentage points in June to a level of 52.6%. A reading above 50% implies expansion in the U.S. manufacturing sector. This was the second consecutive monthly improvement in the survey. The New Orders Index increased 24.6 percentage points from May to 56.4%, with the Production Index climbing 24.1 percentage points to 57.3%.

Manufactured goods can represent nearly 85% of total tonnage for some LTL carriers.

The early June data is a continuation of a meaningful recovery from the COVID-19-induced lows seen in April. Many LTL carriers highlighted improving tonnage and revenue trends from April to May in their midquarter reports.

ArcBest Corp. (NASDAQ: ARCB) and Old Dominion reported year-over-year revenue declines of around 20% in April and in the mid- to high teens in May. SAIA reported a 12.9% year-over-year decline in April tonnage, with May tonnage down only 8.8%. SAIA doesn’t provide midquarter yield metrics.

“Our observations are positive for our overall bullish stance on LTL industry and pricing dynamics, with our top picks remaining XPO and SAIA, and only valuation keeping us on the sidelines with respect to ODFL,” concluded Mehrotra.

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