Old Dominion Feels Ripple from Yellow's Closure

August brought some interesting twists and turns for Old Dominion Freight Line, thanks to major competitor Yellow's shutdown.

Here's a quick breakdown:

August vs. July

• Revenue per day dropped only 1.4% year over year in August, a stark contrast to the 13.3% decline in July.  Old Dominion resisted lowering rates to maintain its network's freight flow.

Tonnage Impact: Tonnage dipped by 6% in August, following an 11.1% decline in July. These figures marked an improvement from the second quarter's 14.1% decline.

Competitor's Shutdown

One of Old Dominion's biggest competitors, Yellow Corp, ceased operations in July, indirectly boosting Old Dominion's August shipments by 6%.

Market Conditions

• The Manufacturing Purchasing Managers’ Index remained in contraction territory in August.
• However, Old Dominion's revenue per hundredweight grew by 1.8% year over year in the first two months of the third quarter.

Yield Growth

• Yield growth accelerated from July to August, driven by competitive dynamics and lower weight per shipment.

Impact Expectations

• Old Dominion expected to gain market share as competitors onboarded Yellow's freight quickly, potentially negatively affecting service levels.
• The full impact of Yellow's closure on Old Dominion might take some time to unfold.

Analyst Projections

• Analysts anticipate higher earnings estimates for Saia and Old Dominion due to better-than-expected results.
• Fuel Prices: Less-than-truckload carriers benefit from higher diesel prices, and diesel costs increased sequentially in the third quarter.  

Capacity

In July, Old Dominion reported having roughly 30% excess capacity, 5 percentage points higher than normal.

Despite the industry's challenges, Old Dominion Freight Line navigated the rough seas in August with resistance and growth prospects.  

Source: FreightWaves