Knight-Swift, ODFL buckle on improved pricing as weak freight market takes toll on earnings

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Old Dominion Freight Line (CCJ Top 250, No. 9) and Knight-Swift Transportation (No.4) saw earnings fall in Q3, citing a soft freight market and supply chain disruptions.

ODFL’s revenue took a 3% dive in Q3 at $1.47 billion, while profit dropped to $308.6 million, down 9% from the same quarter a year ago. The revenue decline was driven by a 4.8% decrease in LTL tons per day that was partially offset by a 1.5% increase in LTL revenue per hundredweight. Compared to the third quarter of 2023, LTL revenue per hundredweight, excluding fuel surcharges, increased to 4.6%, indicating a disciplined approach to pricing.

Despite improvements in pricing, the drop in demand was too much. As a result, ODFL president and CEO Marty Freeman said it marks the first annual decline in quarterly profit and revenue for the carrier this year. The carrier’s LTL service had previously resisted negative trends in the wider trucking industry, thanks to limited capacity and comparatively stable rates.

The third quarter’s results reflect an ongoing softness in the economy, Freeman said. The tough operating environment and strong performance results last year, when the shutdown of competitor Yellow drove thousands of shipments into the LTL market, also impacted the results.

Freeman emphasized that the priority is maintaining a disciplined, long-term pricing strategy. This includes steadily increasing yields to effectively counter cost inflation and fund investments in capacity and technology. He added that the continuous investments have created added value for customers.

During an earnings call with analysts, Chief Financial Officer Adam Satterfield said that ODFL is continuing to get price increases through bid renewals, which they expect to go through the rest of the year and early next year.

“I can only speak for us, but the environment has been pretty stable all things considered this whole year, and we’ve been able to continue to get our increases,” Satterfield said.

Meanwhile, Knight-Swift’s revenue fell 7.1% in Q3 at $1.88 billion, while profit dived to $30.5 million, down from 49.4% in the same quarter last year.

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The market played out as expected, said Chief Executive Officer Adam Miller, though Hurricane Helene and the port strike disrupted volumes across asset-based businesses in the last week of the quarter. In addition, the arrival of Hurricane Milton in the early days of October prolong the supply chain disruption into October, particularly affecting US Express and AAA Cooper.

After a long period of weak pricing for truckload carriers, Miller said the carrier had seen some stabilization and rate increases in its latest bid awards, sequentially improving its average truckload revenue per mile over the second quarter. Miller said though both are still at “unsustainable levels,” Knight-Swift’s average spot rate remains higher than the average contractual rate,

“We believe we are seeing opportunities to address acute needs for our customers that may not be reflective of the broader market.” he said. 

In an earnings call, Brad Stewart, treasurer and senior vice president of investor relations at Knight-Swift, said, “For now, we remain focused on disciplined pricing, cost control, and operational excellence." 

In its LTL market, Knight-Swift said that associated startup costs and operational inefficiencies were initial headwinds to improve operating margins. In the next year, Miller said the focus is on continuing to gain volume with new and existing customers particularly as the carrier goes through its first bid cycle with the expanded network.

Miller explained that their pricing approach allows them to aim for more volume with less risk of lowering profits. “Our approach here will not be unlike our approach in truckload, where a cohesive network strategy, disciplined pricing and intentional capacity deployment to support better market density, operational efficiency and service quality.” he said.

Both carriers are cautiously optimistic to the current market.

“We continue to observe positive signs, including a continuation of seasonal patterns,” Miller added.

Satterfield said although it’s a “long way from there,” ODFL is encouraged by volume trends so far. “This is the first time that we’ve been, I would say, relatively close to what our normal sequential changes have been in the first month of the quarter.”

Pamella De Leon is a senior editor of Commercial Carrier Journal. An avid reader and travel enthusiast, she likes hiking, running, and is always on the look out for a good cup of chai. Reach her at [email protected]