Back at it again!
In true Q1 fashion, it’s LTL Carrier Quarterly Earnings season for Q4.
Each quarter, our newsletter contains a Carrier Earnings series where we analyze the financial performance of different prominent carriers within the logistics industry by dissecting the quarterly results they release after each quarter.
As we did with our Q3 Earnings analyses, these articles will also pay attention to the factors driving success or challenges within each carrier's operations and will focus on Q4 Earnings to do so.
Once again…first up is FedEx Freight!
FedEx’s fiscal calendar runs one month ahead of virtually all other LTL carriers. Their accounting calendar begins in June, with their latest reported quarter covering the Sep-Nov 2023 time period.
For that reason (and because FedEx Freight is the largest LTL carrier in the US), their quarterly earnings release gives us somewhat of a leading indication of the LTL industry.
You can read up on FedEx Freight’s Earnings from Q3 in our most recent report about them, found here as the first edition our Q3 Earnings series from #LetsTalkLogistics!
For more information about carrier performance reporting, click here to connect with someone on our team today.
Otherwise, here are their results from Q4! (+ our commentary of course):
📣Carrier #1: FedEx Freight
Shipment counts were down -5.1% and tonnage was down -10.4% compared to last year which shows continued softness in the market (even with the closure of Yellow Corp).
FedEx picked up some Yellow business, but it wasn’t enough to reverse their recent drops in business relative to the prior 2022 year.
29 terminals were closed in the prior quarter, also impacting their year-over-year comparisons.
Revenue was down -3.8% - impacted negatively by market softness and reduced fuel surcharges, but positively impacted by yield management.
📈 Quarter-over-Quarter Improvement...Increases all around!
On a sequential basis, FedEx saw a modest 3.6% increase in tonnage and 4.6% increase in shipment counts plus a 3.0% increase in revenue.
Revenue = significantly impacted by lower fuel prices and thus lower fuel surcharges.
FedEx got its benefits from additional business due to the closure of Yellow, but they still appear to have taken on a lower percentage of business relative to their size.
(Other carriers such as Saia have gained a much larger share.)
Their OR dropped (AKA improved) in impressive fashion from 82.1 in 2022 to 79.4 in 2023.
Quite the feat to pull off a sub-80 in this soft LTL environment!!
(Their OR was largely unchanged from the 79.0 posted in the prior quarter, and you can read about that in our FedEx Q3 Earnings Report which we released at the end of October.)
Weight per shipment dropped a rather significant 5.4%, further indicating softness in the market and an impact from their acquired Yellow business.
Fuel as a % of Revenue dropped from 8.7% to 7.0%, putting pressure on revenue and profits as fuel surcharges dropped to greater extents.
Profitability and Outlook into 2024
The negative impact of fuel and weight per shipment on earnings puts their 79.4 OR in a very good perspective.
FedEx Freight is doing a nice job growing yield and managing Revenue Quality.
FedEx Freight has held on to the 5,000ish shipments per day they gained after Yellow’s closure…and they appear to have held on to this new business at attractive rates.
Management believes that former Yellow customers are enjoying a ‘more favorable value proposition’ with FedEx Freight's service, and they have retained the majority of the business obtained.
(Their numbers back this up.)
Margins are predicted to remain strong in 2024, but not as strong as 2023 as softness in the market and pressure on pricing is moderating margins.
Further, management believes that FedEx is leading the charge on disciplined Freight Pricing.
💱 A BANG-UP job managing Revenue
FedEx Freight seems to have been selective in the freight they secured from Yellow and identified customers who valued higher service levels (and were willing to pay for it).
Given FedEx Freight's ability to improve price and profit in the face of reduced business levels, the stage could really be set for them - IF we begin seeing freight demand improve in 2024.
Also, one question to ask here…
WHAT is FedEx Freight doing with their Space and Pace pricing program that was announced in late 2022 ???
We’ve basically heard nothing about this "pilot" since - and given how FedEx Freight has been managing customers and revenue, one can only wonder if FedEx will be pushing this new ‘Dynamic Profile-based Non-NMFC Program’ forward in major fashion in 2024.
They seem to have the leverage / incentive to do so and should have access to a large number of customers who would support this new type of pricing.
And the industry is ready for change - so 2024 is a good time to push forward on this in a big way.
👀 More Carrier Earnings reports coming soon…who’s next?
As more carriers begin releasing results from their Q4 Earnings, our upcoming articles will dissect what we’re noticing with others in the freight space and offer commentary on what that means for the market in 2024.
Come back next week for another edition of #LetsTalkLogistics, and stay tuned to find out which carrier we’ll cover next in our Q4 Earnings series!
Looking to diversify your LTL carrier portfolio? Rising LTL carrier profits like we see here with FedEx mean it's time to test the field to ensure you're getting a fair rate. Click this link to connect with someone on our team today.
This article was collaboratively written by “LTL Observers” - a collective of industry veterans spanning the carrier, shipper, 3PL, and tech provider spaces who are willing to share their opinions.
Disagree with these opinions? We'd love to add you to the line-up to make sure we're including a diverse set of LTL observers. Contact us today.