Old Dominion Freight Line delivered a mixed performance in August, with stronger yield growth helping offset continued weakness in tonnage. The less-than-truckload carrier reported a clear acceleration in revenue and yield growth during the month, while shipment volumes remained slightly below year-ago levels.
The Thomasville, North Carolina-based company recorded a 12.4% year-over-year increase in daily revenue in August, up from the 8.2% growth reported in July. At the same time, diesel fuel prices rose 46% year over year in August, compared with a 31% increase in July. Fuel prices were also 10% higher sequentially during the month.
For LTL carriers, higher diesel prices can have a meaningful effect on reported revenue because fuel surcharge programs generally incorporate step functions as diesel prices rise. That structure can also support improved margins.
At Old Dominion’s NASDAQ: ODFL, yield growth accelerated in August both including and excluding fuel surcharges. Revenue per hundredweight, or yield, was likely approximately 13% higher year over year with fuel surcharges, compared with around 5.5% higher excluding fuel. In July, the corresponding growth rates were 9.3% and 4.2%.
Across the two months combined, yield growth stood at 11.3% including fuel and 4.8% excluding fuel. Higher shipment weights represented a modest drag on the yield calculations in both July and August.
“Old Dominion produced solid revenue growth for July and August, with underlying demand trends remaining relatively consistent as the quarter has progressed,” said Marty Freeman, president and CEO, in a news release. He added that the consistency and strength of the company’s industry-leading service continue to support improvement in LTL revenue per hundredweight.
August performance at a glance
| Revenue | Shipments | Weight/Shipment | Tonnage | Revenue/cwt | Revenue/Shipment | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jul | Aug | Jul | Aug | Jul | Aug | Jul | Aug | Jul | Aug | Jul | Aug | |
| ArcBest | 7.0% | -3.0% | 11.0% | 8.0% | -1.0% | 10.0% | ||||||
| Old Dominion | 8.2% | 12.4% | -3.0% | -2.4% | 2.0% | 1.7% | -1.0% | -0.9% | 9.3% | ~+13% | ~+11% | ~+15% |
| Saia | N/A | N/A | 0.8% | 1.1% | 7.0% | 7.5% | 7.8% | 8.7% | N/A | N/A | N/A | N/A |
| XPO | N/A | N/A | 6%+ | 0.0% | 6%+ | N/A | N/A | N/A | N/A | |||
Revenue/hundredweight and revenue/shipment include fuel
ArcBest metrics include entire asset-based segment
Despite the stronger revenue performance, Old Dominion’s tonnage declined 0.9% year over year in August, almost unchanged from the 1% decline recorded in July. The company also faced a slightly easier year-ago comparison in August.
On a two-year stacked basis, however, the picture was weaker. Tonnage was down 10.1% in August, compared with a 9.3% decline in July.
The August tonnage result reflected a 2.4% decline in daily shipments, partly offset by a 1.7% increase in weight per shipment. Shipment weights have been trending higher as conditions in the industrial economy gradually improve.
That development comes as manufacturing activity remains in expansion territory. The Institute for Supply Management’s Manufacturing PMI recorded its eighth consecutive month in positive territory in August, reaching 54.6. The reading was 60 basis points below expectations and one percentage point lower than the four-year high reached in July.
A PMI reading above 50 indicates expansion, while a reading below 50 signals contraction. More importantly for carriers, the new orders subindex fell three points to 53.7, attracting attention because it provides an indication of future activity. LTL tonnage trends typically lag the manufacturing index by about three months.
The August PMI result was somewhat weaker than expected, and the decline in new orders added to investor concerns. Shares of publicly traded LTL carriers fell sharply after Tuesday’s update, with stocks closing the day 4% to 7% lower, while the S&P 500 declined only 0.7%.
August results reinforce Old Dominion’s Q3 outlook
Old Dominion’s results so far this quarter are pointing toward the upper end of management’s third-quarter guidance.
Revenue is currently trending toward a 10% year-over-year increase, or approximately $1.55 billion, which is in line with the prevailing consensus estimate. Management had expected yield growth to moderate to between 4% and 4.5% year over year, but August’s performance appears to have come in ahead of that expectation.
For the third quarter, Old Dominion is guiding to an operating ratio deterioration of 150 to 200 basis points sequentially from the company’s 70.1% unadjusted operating ratio in the second quarter. That second-quarter figure included a real estate gain.
The implied third-quarter operating ratio of approximately 71.9% would still represent a 240-basis-point improvement year over year.
Freeman maintained a confident outlook for the company, saying Old Dominion remains well positioned to capture profitable market share and increase shareholder value through continued execution of its long-term strategic plan.
The carrier has historically outgrown the broader market by approximately 9 to 10 percentage points during an upcycle, making its August performance particularly relevant for the wider LTL sector.
Why it matters
Old Dominion’s August numbers offer an important read on the direction of the LTL market. While shipment volumes remain under pressure, the company is generating stronger revenue through improved yields and pricing discipline.
The combination suggests that carriers are continuing to place greater emphasis on profitability, pricing and service quality rather than simply pursuing volume growth. For investors and industry observers, Old Dominion’s performance therefore provides a useful indication of how LTL operators are navigating modest demand conditions while positioning themselves for a potential improvement in the industrial economy.
