Like most less-than-truckload carriers, asset-light provider Forward Air reported improved sequential volume trends in August. The inflection was largely tied to the shutdown of Yellow Corp.

Forward (NASDAQ: FWRD) said tonnage in its expedited freight segment, which includes LTL, truckload and final mile, was down 3% year over year (y/y) for the first two months of the third quarter. However, August tonnage was flat y/y compared to a 5.9% decline in July.

The tonnage numbers are better than the 7.7% decline the company logged in the second quarter. In the days leading up to the Aug. 2 report, which overlapped with Yellow’s closure, Forward said tonnage improved approximately 7%.

The company has made efforts to garner more of the high-value LTL freight market, which tends to have higher shipment weights. So far in the third quarter, weight per shipment is up 7.8% y/y, outpacing the 5.4% increase booked last quarter.

“In the month of August, we started seeing positive momentum in volumes,” said Tom Schmitt, chairman, president and CEO. “In the first few days of September, we are seeing a continuation of the increase in volumes.”

Forward provides limited revenue-based metrics in its intraquarter updates. It said revenue per shipment excluding fuel surcharges was up 0.9% y/y in the period, with revenue per ton mile (excluding fuel) 2.2% higher.

Did recent merger announcement scare off customers?

The company missed second-quarter expectations and provided a worse-than-expected third-quarter outlook.

It forecast a revenue decline of 11% to 21% for the current quarter, which included the expectation for tonnage to increase 5% y/y in the period. That implies a roughly 20% y/y increase is needed in September to hit the mark. The comps from a year ago have eased as the market rolled over at the end of last summer. Forward had a slightly negative tonnage result in September 2022.

The revenue guidance was made in early August. Management said August tonnage was up 7% y/y at the time. However, a week later it announced the acquisition of forwarding customer Omni Logistics. The reaction from investors and Forward’s legacy customers was visceral. The stock gapped down more than 40% in the days that followed and closed Thursday 36% lower since the announcement.

The reaction from customers was equally alarming, with some saying they would seek other capacity options. Forward has historically provided linehaul capacity to forwarders, but now it will have its own forwarding unit selling directly to shippers, putting it in direct competition with customers.

Forward has vowed to maintain separate sales teams and said that its existing customer lists and shipment data won’t be shared with Omni. However, it’s unclear if some of those legacy accounts have already begun to move their freight elsewhere. Schmitt said at a Wednesday investor conference that “It’s been a tough and very sensitive time with our domestic forwarder customers,” but they are “still entrusting us with their business.”

A potential tailwind for the company’s third-quarter revenue expectations could come in the form of higher fuel prices. Management cited lower diesel prices (as well as the need to use more conservatism when forecasting) as part of the reason for the soft revenue guidance. Currently, per-gallon diesel prices are up almost 20% since the end of the second quarter.

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