Forward Air Lowers Third-Quarter Projection, Blaming Tough LTL Market
Forward Air Corp. lowered its third-quarter earnings projections, no longer confident that it’ll generate more revenue than the same period in 2015, the company announced on Sept. 20.
After the second quarter, the Greeneville, Tennessee-based company told analysts that it projected revenue to grow between 1% and 5% for the third quarter of 2016 versus 2015, but now it has lowered the range to -2% to 2%.
“Since our second-quarter earnings call, the economic environment has remained sluggish. While we are seeing the effects across our portfolio, LTL volumes have been noticeably soft,” CEO Bruce Campbell said. He added that through Sept. 18, tonnage per day for the less-than-truckload segment is down 4.6% compared to the same period last year.
As a result, Forward Air also lowered its overall earnings range to 48 to 52 cents from 61 to 65 cents.
Benjamin Hartford, an analyst with Robert W. Baird & Co., said he believes the Hanjin bankruptcy also had an impact.
“While the sluggishness to the macroeconomic and freight environments should not be a surprise…we suspect the recent Hanjin bankruptcy and resulting backlog has not benefited FWRD’s Expedited LTL segment during September,” he wrote in an analyst note.
John Barnes, an analyst with RBC Capital Markets, expressed surprise and disappointment at the announcement because of what Forward Air said at industry conference the investment bank sponsored on Sept. 7.
“We are coming off the RBC Global Industrials Conference, and management’s tone appeared more upbeat. They acknowledged a difficult economic backdrop but indicated that there was an improvement in freight volumes to start September,” he writes in a note.
Forward Air, which ranks No. 35 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, primarily offers less-than-truckload service for airfreight and freight forwarders.
“If we look at airlines, primarily international, that business probably hit the bottom, I would guess, sometime in July, early August. We’re seeing a little bit of a recovery, not sitting here, jumping up and down about it, but it’s no longer going down, and it’s coming back up,” Campbell said at the Sept. 7 event. “On the domestic forwarders in the U.S., they’re finally talking positive. So, we’ve seen in the last 10 days, we’re starting to see positive numbers. We’re pleased with that. Ten days doesn’t make a trend, it doesn’t mean like the rest of September is going to be like.”
Forward Air is just the latest less-than-truckload carrier to report difficult conditions this quarter.
“We believe this pre-announcement, coupled with mid-quarter updates from ODFL [Old Dominion Freight Lines] and ARCB [ArcBest], shows just how difficult the LTL and expedited LTL operating environment remains,” Barnes adds.
Earlier this month, ArcBest reported August shipments rose 1% year-over-year, but the weight per shipment fell 4% and resulted in an overall decline in tonnage. Old Dominion’s August results included 1.4% fewer tons per day, reflecting 1.5% fewer shipments per day in that month.
Old Dominion and ArcBest rank Nos. 11 and 12, respectively, on the TT100 list of for-hire carriers.
