Stocks of less-than-truckload carriers were priced in with above-average results heading into earnings season. Saia missed first-quarter expectations on Friday, sending its shares down 20% and dragging the rest of its peer group lower for the second time in a week.
Saia (NASDAQ: SAIA) said March did not bring the seasonal increase in demand that the company typically experiences. The update followed an inline report from Old Dominion Freight Line (NASDAQ:ODFL) on Wednesday that accelerated a selloff that began earlier this month as the broader market began to move lower, and some analysts suggested The quarterly prints fluctuated as figures were released.
In less than three weeks, Saia shares have fallen more than 25%.
The relative volume weakness in March has not detracted from the company’s robust growth plans.
Saia plans to open 15 to 20 new terminals in 2024 and relocate some operations to larger facilities or better locations. So far this year, four terminals have been opened and four terminals have been relocated. The majority of the remaining locations will open in the third quarter, with a focus on the Great Plains.
The company has 28 terminals (11 of which are leased) from the estate of the insolvent Yellow Corp. (OTC: YELLQ). Starting with a northeast expansion project in 2017, the company has opened 50 locations. The company will spend about $550 million on real estate this year, increasing its door count by about 12% to 14%. Additionally, the company will spend a total of $400 million on equipment to achieve its growth goals.
Saia reported first-quarter earnings per share of $3.38, 7 cents less than consensus estimate but 53 cents higher year-over-year (year-over-year).
Revenue increased 14% year over year to $755 million as tonnage per day increased 6% and revenue per hundredweight or yield increased 8% (11% higher excluding fuel surcharges). The tonnage increase was the combination of a 16% increase in shipments, partially offset by an 8% decrease in weight per shipment.
The decrease in shipment weight led to an increase in the earnings ratio.
Compared to the fourth quarter, tonnage per day fell 1%, as did revenue excluding fuel surcharges.
Deliveries per day rose 16.8% year over year in March, but fell short of management expectations. So far in April, shipments are up 17% year-on-year, while tonnage is up 6.5%. The company said April metrics would benefit by one to two percentage points as Good Friday took place in March this year instead of April last year.
“We are focused on creating value for our customers and returns for our shareholders,” Saia President and CEO Fritz Holzgrefe said on a Friday call with analysts. “We don’t remain fixated on volume numbers. We remain focused on ensuring we meet these first two expectations.”
Saia’s daily shipments rose 16% to 33,000 last year. The carrier has been one of the most active providers since Yellow closed last summer.
Revenue per shipment increased just 1.4% year-over-year excluding fuel, 0.4% below the fourth quarter. That, too, sparked concern among analysts, who base their bullish outlook for the sector on airlines’ idiosyncratic ability to price cargo well above cost inflation.
Management responded that the pricing philosophy had not changed and that the company was taking more shipments from large national customers that sometimes had lower margins. The decline in weight per shipment and a 0.4% decline in transport length also impacted the key figure.
“If I get some savings on the cost side, so if I withdraw with one of the larger accounts, instead of two or three bills, I get five or six. … I’m seeing really good cost savings there,” said CFO Doug Col.
The decline in cost per shipment was 80 basis points greater than the decline in revenue per shipment in the quarter.
“If you gave us a stronger macro backdrop, I would still say… you’re going to see further uptick at this pricing. It doesn’t get cheaper to do what we all do,” Col added.
Renewals averaged a 9.2% increase during the period, 50 basis points higher than the average increase in the fourth quarter.
Management expects second-quarter revenue to increase by a mid-single-digit percentage compared to the first quarter. That represents roughly a 15% increase year-over-year, which would equate to about $35 million given the current consensus estimate of $829 million.
The company achieved an operating ratio of 84.4%, which was 60 basis points better year-over-year and quarter-over-quarter. The result represented a normal sequential improvement of 50 to 75 basis points, even with worse weather in January.
Spending on salaries, wages and benefits (as a percentage of sales) remained flat year-over-year, even with a 15% increase in headcount and the implementation of a 4.1% wage increase last July. Depreciation expense (as a percentage of sales) also remained flat year-over-year despite recent growth-oriented investments.
Saia typically sees an OR improvement of 250 to 300 basis points from the first quarter to the second quarter. However, given the costs associated with opening new terminals, only an improvement of 150 to 200 basis points is forecast this year. The company reiterated its guidance for an OR improvement of 100 to 150 basis points for full-year 2024.
Saia also announced on Friday that Col will be retiring after 10 years with the company. He will remain in this role for the remainder of the year to ensure a smooth transition.
Shares of SAIA fell 21.3% as of 12:06 p.m. EDT on Friday, compared with the S&P 500, which gained 1%. XPO (NYSE: XPO) fell 10.2%, ArcBest (NASDAQ: ARCB) fell 6.8% and ODFL lost 6%.
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Contributor Saia missed the first quarter and weak deliveries in March caused shares to fall 20%. It first appeared on FreightWaves.