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Similar to other less-than-truckload carriers, XPO saw a notable year-over-year (y/y) improvement in volumes in February when compared to January.
In a Tuesday update following the market close, the carrier said tonnage grew 3.5% y/y in February as a 5.8% increase in shipments was partially offset by a 2.2% decline in weight per shipment. The tonnage increase was an improvement from a modest decline in January.
Further, XPO (NYSE: XPO) was facing tougher tonnage comps than most peers. When stacking January and February growth rates for the past two years, XPO’s tonnage was up roughly 1.5% in each month, which was largely in line with Saia Inc. (NASDAQ: SAIA) and well ahead of double-digit declines at Old Dominion Freight Line (NASDAQ: ODFL).
XPO doesn’t provide revenue-based metrics in its intraquarter updates. The company guided to a roughly 10% y/y increase in yield (excluding fuel surcharges) for the first quarter during its fourth-quarter call a month ago.
Full-year guidance calls for yields to be up by mid- to high-single digits, with tonnage up by low-single-digits. Those forecasts are not dependent on a material positive inflection in the broader economy, management said.
Modest declines in weight per shipment have been a positive catalyst for yields.
Much is left to be determined in the first quarter, however, as the month of March typically accounts for half of the carrier’s quarterly result.
XPO normally sees 40 basis points of deterioration in its operating ratio from the fourth to the first quarter but plans to better that level this year. That implies a similar OR to the 86.5% result it produced in the fourth quarter, which would be roughly 300 bps better y/y.
For the full year, its OR is expected to improve by a total of 150 bps to 250 bps.
XPO recently acquired 28 terminals valued at $870 million from bankrupt Yellow Corp. (OTC: YELLQ). The additions will bring approximately 3,000 new doors to its network, 1,000 of which will not be incremental.
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