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When will the freight upturn arrive?

May 8, 2023

The freight-hauling slump that started late last year took a decided downturn in March. A look at earnings calls of publicly traded companies yielded little consensus about when the freight recession will end.

Geert De Lombaerde

Adam Satterfield isn’t prepared to get burned again.

The CFO of Old Dominion Freight Line Inc. told analysts on April 26 after the No. 10 carrier on the FleetOwner 500: Top For-Hire Fleets of 2023 list reported first-quarter results that volumes in May should “naturally” show a little bit of growth as beverage companies begin shipping for the summer months. But he also had a major caveat ready to add.

“Do we start growing from there? Do we see 1% or growth in June? I'd like to think that we would,” Satterfield said. “We've had a lot of good conversations. We've had some good hits here lately with customers. But some of those same conversations we were having three months ago were positive as well. So I think that, right now, we just want to be conservative.”

By the accounts of Satterfield and his peers at other publicly traded carriers, the freight downturn that started late last year took a decided turn for the worse in March. Volume declines that had been around 2% early this year quickly turned into year-over-year declines of more than 5%. So it’s little surprise that trucking management teams were peppered with a lot of questions on their first-quarter conference calls that can be summed up in one word: “When?”

For Old Dominion, the answer is something along the lines of “not soon.” President and CEO Greg Gantt told analysts that volumes stabilized in January and February but have since defied his team’s expectations by not rising from there. April shipments, Gantt added, were trending to be down double digits.

This May 1 graphic taken from U.S. Bank Freight Payment Index data shows the recent freight shipment slump in most regions of the country besides the Southwest.

Alain Bedard, chairman, president and CEO of TFI International Inc., is similarly downbeat about a quick turn in the market. After lowering the full-year profit forecasts for the No. 9 carrier on the FleetOwner for-hire 500, Bedard said consumers’ much-talked-about shift from spending on goods during the depths of the pandemic to services such as dining and travel is enduring.

“When we talked to our customers [early this year], we thought that Q2 would be soft and we thought that Q3 and Q4 would be better,” Bedard said. “Right now, the discussion we're having is that, ‘No, no, no, this is not going to happen.’ Q2 is going to be soft, Q3 and Q4 [are] going to be probably the same.”

Or will they?

Earnings season has also featured some more upbeat assessments. Some of them came from UPS Inc. CEO Carol Tomé and CFO Brian Newman. The latter said conversations with customers have the team at Big Brown thinking volumes will rebound “post the summer” after a midyear trough. Tomé noted that volume in the U.S. for UPS—which had slipped to being down 7% year-over-year in March—has stabilized this month.

Also confident in a turn before cold weather returns is Dave Jackson, president and CEO of Knight-Swift Transportation Holdings Inc., which is No. 3 on the FleetOwner for-hire 500. One reason he’s looking for the market to turn by the end of the third quarter—the same time frame Mike Gerdin of Heartland Express Inc. gave analysts and investors last week—is that imports should pick up steam after a slow winter. Another is that many carriers, most of them small, will continue to leave the market because today’s economics just don’t work for them.

“We still have some more supply that needs to be worked through,” Jackson said on Knight-Swift’s April 20 conference call. “But we think that we’re nearing levels where you start to overcorrect how much supply has come out.”

Specific company situations, strategic priorities, and market positions will of course matter immensely as leadership teams prepare for the market to rebound. But, as Covenant Logistics Group Inc. Chairman and CEO David Parker pointed out on April 28, he and his peers could soon be working with a nice new tailwind.

“I was glad to see in the first-quarter GDP number that inventory levels were reduced because that's what all of us on this call are waiting on,” Parker said. “Because I don't care what the economy is doing if they're going to have to refill some inventories.”

About the Author

Geert De Lombaerde | Senior Editor

A native of Belgium, Geert De Lombaerde has more than two decades of experience in business journalism. Since 2021, he has written about markets and economic trends for Endeavor Business Media publications FleetOwner, Healthcare Innovation, IndustryWeek, Oil & Gas Journal, and T&D World.

With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati. He later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post and reported primarily on Middle Tennessee’s finance sector and many of its publicly traded companies.