Saya says demand lost momentum as Q3 progressed

Less-truckload carrier Saia said demand weakened during the third quarter. Before the market opened Monday, the company reported earnings per share of $3.67, beating analysts’ estimates by 3 cents.

Earnings per share increased by 81 cents year-over-year, “despite the softer demand seen in the last few weeks of the quarter,” Fritz Holzgraefe, president and CEO, said in a news release.

For the period last year, 12 cents per share related to the profit from the sale of real estate were not taken into account. A 100 basis point year-over-year tax rate cut was a 5-cent headwind to earnings per share in the latest quarter.

Revenue rose 18% year-on-year to $730 million as like-for-like growth in revenue per hundredweight offset a less than 1% decline in tonnage. Shipments fell nearly 3%, but weight per shipment increased 2%. Excluding fuel surcharges, profitability increased 8% YoY, “reflecting the continued constructive LTL pricing environment,” noted Holzgrefe.

Saia’s revenue (excluding fuel) grew 8% YoY in the quarter.

Deutsche Bank (NYSE: DB) analyst Amit Merotra was also upbeat on the yield results: “It is also notable that the company’s yields, including fuel, have consistently increased despite consistent headwinds in fuel surcharges … implying that the base mix/prices continue to move in the right direction direction”.

Mehrotra warned that the bulk of the carrier’s profit improvement in 2022 is likely to come from higher fuel prices, potentially creating a headwind for earnings next year when diesel prices retreat. LTL surcharges are tied to base rates on a sliding scale, allowing carriers to earn more during periods of rising fuel prices.

However, he still sees opportunities for Saia to get $200 million per shipment as the company better aligns the rates it charges with its improved service performance. Overall, he sees earnings per share approaching $12 in 2023, versus the current consensus estimate of more than $13.

The company reported an operating ratio of 82.4%, which is 110 bps better than the same period last year, excluding prior-year growth. Shipping revenue growth outpaced adjusted shipping price growth (excluding growth) by only 20 bps. in the quarter.

“I am pleased with the year-over-year operating ratio improvement and that we were able to achieve this while still being able to provide our employees with a pay raise in July,” said CFO Doug Kohl.

Kohl said depreciation expense increased as the company took on new equipment. However, relief in maintenance and purchased transportation costs should provide compensation moving forward. The company plans to go the extra mile with company assets and drivers compared to third-party capabilities.

The largest change in expenses in the quarter occurred in the line of wages and benefits, which was by 420 bps. lower compared to the same period last year as a percentage of revenue.

Net capital expenditures are expected to reach $500 million during 2022.

The carrier opened 11 new facilities in 2022, including the addition of five facilities in the third quarter and one in October. No other openings are planned for this year, but 10 to 15 sites are slated to open next year.

“Customer response to our expanded service capabilities continues to be positive, and we believe the terminal expansion strategy allows us to provide differentiated levels of service,” added Holzgrefe.

The company ended the quarter with a net cash position that grew 73% year-over-year to $115 million.

Saia has rescheduled its third-quarter analyst call for Tuesday at 8 a.m. EDT due to a technical issue the conference call service provider was experiencing.

More FreightWaves articles by Todd Maiden

Operator update