Old Dominion’s May update in line with prior Q2 guide

The Purchasing Managers’ Index (PMI) – a bellwether for manufacturing activity – remained slightly in contraction territory during May at 48.5. The index has been underwater in 29 of the past 31 months. The PMI dataset typically leads inflections in LTL volumes by approximately three months.

The PMI new orders subindex – a proxy for future near-term activity – improved slightly but remained in decline at 47.6. The new export orders subindex continued to see the overhang of tariffs, falling into “extreme contraction” at 40.1.

The LTL industry continues to capture rate increases despite the demand malaise.

Old Dominion said revenue per hundredweight, or yield, was up 3.2% y/y for the first two months of the second quarter (5.6% higher excluding fuel surcharges). The dip in average shipment weight modestly benefited the metric.

Retail diesel fuel prices were off 8.5% y/y in May following an 11% decline in April. A sliding fuel surcharge scale makes higher diesel prices incrementally more accretive to LTL carrier margins but presents a headwind when fuel prices are falling.

“We believe that our market share has remained relatively consistent throughout this extended period of economic softness, despite the year-over-year decrease in our LTL volumes,” Old Dominion President and CEO Marty Freeman said in a Wednesday news release. “Customers have continued to value our industry-leading service, which supports our ongoing yield management initiatives.”

The company previously guided to second-quarter revenue of approximately $1.4 billion (a 7% y/y decline, or a 5% decline on a per-day basis) assuming April’s volume and yield trends held throughout the quarter. That outlook included a 5% to 5.5% increase in yield (excluding fuel), which is in line with the actual result seen during the two months.

A second-quarter operating ratio forecast calls for only 100 basis points of sequential improvement from the first quarter versus the normal change rate of 300 to 350 bps of improvement. That guide implies a 74.4% OR, which would be 250 bps worse y/y.

The company normally sees an 8% step up in revenue sequentially in the second quarter but is only seeing a 3% increase so far this year.

“While the macroeconomic environment remains uncertain, we will continue to focus on executing on our long-term strategic plan,” Freeman added. “Our service metrics and value proposition remain best in class, which we believe puts us in a unique position to win profitable market share and increase shareholder value over the long term.”

Shares of ODFL were off 1.1% in early trading on Wednesday compared to the S&P 500, which was up 0.3%.

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