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Forward Air shares whacked after tonnage, shipment size and weight fall

Forward Air Corp. shares fell sharply in Thursday morning trading after the transportation company reported a significant weakness in fourth-quarter less-than-truckload tonnage caused by unexpected reversals in size and weight per shipment totals.

Weight per shipment dropped 12% in the quarter, worse than the company and its customers had anticipated. Year-on-year tonnage figures also declined each month in the quarter by double-digit levels, Forward Air (NASDAQ: FWRD) said. 

The tonnage weakness persisted into January, with a 16% year-on-year decline, the company said.

The core problem is that Forward Air’s shipments contained 20% to 25% fewer pieces than the company or its customers anticipated. Customers still dealing with bloated inventories didn’t ship as much, nor were their shipments as large as either the company or its customers expected. 

Forward Air expects inventory levels to normalize, which will lead to fuller shipments and higher volumes. That is unlikely to happen until the second half of 2023 at the earliest.

As a result, Forward Air reported fourth-quarter revenue growth of 5%, well below its guidance of 7% to 11%. It posted adjusted diluted earnings per share of $1.65, also below its guidance of $1.98 to $2.02 per share.

First-quarter guidance wasn’t much better. Diluted net income of $1.30 to $1.34 per share will be well below the $2.57 per share in the 2022 first quarter. Year-over-year revenue is expected to be flat, Forward Air said.

Shares were taken to the woodshed Thursday, trading down 15.5%.

Tom Schmitt, Forward Air’s chairman, president and CEO, said in a statement that the company believed that its push to procure high-value freight would “yield a sequentially better fourth quarter than third quarter.” 

On the positive side, Forward Air’s top high-value verticals went from 18% of its freight mix in 2021 to 29% in 2022, the company said. Year on year, industrial and electronics shipments rose 50%, medical shipments rose 25% and live events business rose 120%.

In addition, Forward Air’s said it was able to keep most of its core LTL customers. The number of LTL shipments in the fourth quarter remained relatively stable with only a 0.4% decline in shipments.