Old Dominion’s May update shows an improving LTL market

Old Dominion Freight Line saw further improvement in its operating metrics during May, as the less-than-truckload industry is now seeing a demand bump from the industrial economy. The Thomasville, North Carolina-based company reported a 12. 3% year-over-year increase in revenue per day during the month. The result outpaced a previously reported 7.

6% revenue increase in April. May tonnage was down just 3. 8% y/y (down 6. 1% in April), with yield increasing approximately 16% during the month. Through the first two months of the quarter, Old Dominion’s yield increased 15. 6% y/y inclusive of fuel surcharges (up 5. 4% excluding fuel).

The revenue-based metrics are being positively influenced by a runup in diesel fuel prices. Less-than-truckload fuel surcharge programs include a step function as diesel prices rise, typically resulting in margin accretion.

On a two-year-stacked comparison, Old Dominion’s (NASDAQ: ODFL) tonnage was off 12% in May, which was an improvement from a 15% decline in April. The carrier’s per-day tonnage appears to have troughed in the first quarter.

“Old Dominion produced solid revenue growth for the first two months of the second quarter,” said President and CEO Marty Freeman in a news release. “While our LTL tons per day declined on a year-over-year basis in both April and May, demand has continued to improve as the quarter has progressed.”

Source: Company reports Manufacturing data released Monday showed industrial activity was positive for a fifth consecutive month in May. The Purchasing Managers’ Index registered a 54 reading for the month, which was 130 basis points higher than April. (A reading above 50 signals expansion, while one below 50 indicates contraction.)

The May reading was the highest for the dataset in four years. The new orders subindex—an indicator of future activity—came in at 56. 8, 270 bps higher sequentially. (Inflections in PMI data usually lead LTL volumes by a few months.) Old Dominion’s shipment weights are up approximately 1. 5% y/y so far in the quarter.

Heavier shipments are a sign that the market is turning and often lead to margin improvement. The carrier previously guided to 300 to 350 bps of sequential operating margin improvement in the second quarter, which is in line with its historical margin progression.

The forecast implies a 73% operating ratio (inverse of operating margin) at the midpoint of the range, which would be 160 bps better y/y and the first meaningful y/y improvement since 2022.

“We remain confident in our ability to win market share and drive profitable revenue growth over the long-term as we continue to execute on the fundamental elements of our strategic plan,” Freeman said. The company normally outgrows the market by 9 to 10 percentage points in an upcycle. Shares of ODFL were up 1. 6% at 9:54 a. m.

EDT on Wednesday compared to the S&P 500, which was off 0. 5%. Shares of ODFL are up 46% year-to-date.

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