Asset-light trucking company Forward Air reported Tuesday after the market closed that the magnitude of tonnage declines booked in the fourth quarter carried into the first two months of 2023. However, the falloff in the first few days of March hasn’t been as pronounced.
Tonnage in Forward Air’s (NASDAQ: FWRD) expedited segment, which includes less-than-truckload, truckload and final mile, was down 12.7% year over year (y/y) in January and February, which followed a 13% y/y decline in the fourth quarter. But the rate of decline has been cut in half so far in early March.
“We entered the year seeing declines in volumes. However, we have recently seen improving momentum in volumes as we ended February and began March with a 6.2% decrease in pounds vis-a-vis a record period last year,” said Tom Schmitt, chairman, president and CEO.
The tonnage decline in the first two months of the year was equally split between a drop in shipments (down 6.7%) and a decline in weight per shipment (down 6.5%).
Forward’s pullback in tonnage outpaced declines posted by asset-based carriers Saia (NASDAQ: SAIA) and Old Dominion (NASDAQ: ODFL) even as its comparisons to the prior year — up 5.5% y/y in January 2022 and up 16.5% y/y in February — were approximately 200 basis points lighter in each month.
Forward’s comp to March 2022 is plus-5.5%.
Revenue per hundredweight, or yield, was up 2.6% y/y excluding fuel surcharges for the two-month period, 600 bps light of what Old Dominion reported. However, Forward’s freight mix is different.
Forward said it continues to target 2023 diluted earnings per share above that of 2022. No update on first-quarter guidance — revenue in a range of up 2% y/y to down 4% y/y with a 16% y/y reduction in EPS at the midpoint of the range — was provided.
“The current slowdown in business volumes has created a challenging environment for the achievement of all our initiatives. We are, however, encouraged based on our current sales pipeline that volumes will increase in the second half of 2023,” Schmitt said.
The news release pointed to several catalysts supportive of the outlook.
The company touted improved shipment quality, which produced a 13.4% y/y increase in weight per piece and a 9% increase in revenue per ton mile for the two-month period.
Cost reductions and improvements in on-time and damage-free shipments are expected to be tailwinds to results moving forward. Over the past three months Forward has reduced head count by more than 200 full-time positions, it continues to keep more expensive outside miles below 5% and it has cut back on company travel.
Shipments tied to live events, which tend to have better margins, were up 12.7% y/y in January, and the company’s Canadian business was up 21.4% y/y in the January-February period.
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