In Old Dominion and Schneider’s reports, silver linings—but no more—about the freight recession
Looking for a sign that today’s drawn-out freight downturn might soon move into history books? Old Dominion Freight Line CFO Adam Satterfield said the North Carolina-based carrier, one of the largest in the country, expects to soon begin hiring more people to meet growing volumes.
Speaking to analysts after Old Dominion, No. 10 on the 2023 FleetOwner 500: For Hire list, reported fourth-quarter profits of $323 million on revenues of nearly $1.5 billion, Satterfield noted that the company finished last year with a workforce of about 22,800, which was more than 4% smaller than at the end of 2022. That figure is even more notable because Old Dominion was among the less-than-truckload carriers that picked up thousands of shipments after Yellow Corp. shuttered its doors in July.
And while Satterfield added that Old Dominion’s payroll is “appropriately sized for our current shipment trends,” he noted that his team is replenishing its talent pipeline. Old Dominion was able last year to move some workers from its docks into trucks, but that’s not a repeatable strategy.
“We’re running our truck driving schools right now to continue to produce more employees that have their CDLs and will be available to drive as demand continues to improve,” he said.
Old Dominion’s fourth-quarter profits and revenues were just about even with those from the last three months of 2022. The company’s operating ratio ticked about half a percentage point to 71.8% as its daily shipments grew 1.5%, but tons per day slipped 2%, reflecting the smaller loads Yellow gravitated toward.
Another indicator that the freight recession may be nearing its last breaths came this week from Mark Rourke, president and CEO of Schneider National. The leader of the Wisconsin-based carrier, No. 7 on the FleetOwner 500, said 2024 is shaping up to be a transition year as shipments should recover—especially in the second half of the year—and capacity continues to leave the market slowly and steadily.
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Those factors are becoming apparent to a growing segment of Schneider’s truckload, intermodal, and logistics customers, Rourke said. Some clients, he and EVP Jim Filter said, are trying to get one last set of concessions from their shippers, but a growing number are recognizing that freight prices can’t fall anymore.
“No one believes we’re in this condition for the long term. It’s just a matter of when,” Rourke said on his team’s Q4 earnings conference call Feb. 1. “I think you’re seeing more balanced thinking going forward than we would have described as we were coming into this juncture in 2023.”
That’s what Bruce Chan and other Stifel analysts are seeing as well. Commenting on Old Dominion’s results, they wrote that the pricing environment now looks “constructive and rational” even if volumes haven’t rebounded to the levels many market players last spring expected them to.
“As the demand environment firms this year, we expect yields to accelerate modestly to the mid-single digit range,” Chan wrote Jan. 31.
