Less-than-truckload carrier Saia took market share again in the fourth quarter, but margins slid as new business wins and terminals came online. The company is at the tail end of an intense network growth initiative that has catapulted it to a national carrier serving all 48 contiguous states. The focus will now shift to pricing and margin opportunities.
Saia (NASDAQ: SAIA) beat fourth-quarter expectations Monday, reporting earnings per share of $2.84, 7 cents higher than the consensus estimate but 49 cents lower year over year. Debt incurred from funding the terminal purchases resulted in a $5.1 million swing from interest income to interest expense in the quarter, a 15-cent y/y drag on EPS.
Management told analysts on a Monday call that the LTL market remains loose as the industrial complex sags and that customers have options as capacity is available. Saia has used the downturn to meaningfully expand its network, opening 21 terminals and relocating nine others last year. The additions included the $235.7 million portfolio it acquired from bankrupt Yellow Corp. (OTC: YELLQ).
Saia reported fourth-quarter revenue of $789 million, 5% higher y/y (up 3.3% on a per-day basis) and a record for any fourth quarter. Three-quarters of the growth came from new terminals that aren’t yet running optimally.
The per-day revenue increase was the combination of an 8.3% y/y jump in tonnage per day, partially offset by a 5.4% decline in revenue per hundredweight, or yield (down 2.3% excluding fuel surcharges). The tonnage increase was due to a 4.5% increase in shipments per day and a 3.7% increase in weight per shipment.
Saia continued taking share in the quarter with tonnage increasing 6.9% y/y in October, 5.7% in November and 13.5% in December. January tonnage was also 13.5% higher y/y. The two-year-stacked comps were up 20% in December and 17% in January, some of the highest since Yellow’s departure.
The increase in weight per shipment dragged the yield metric lower. Yields were positive, netting out the change.
Management noted that pricing across the industry remains rational. It implemented a 7.9% general rate increase in late October. Pricing on contracts that renewed in the quarter were also up 7.9% on average. The company said it’s working to close the revenue-per-shipment gap it has with the rest of the market as service metrics have improved and it now operates a national network.
“We still feel like we’ve got work to do. … We look across the board and we’re cheaper than everybody else. Our footprint expansion and our ability to do a great job for customers in every market is an opportunity … [to] take share but also [to] charge appropriately for it,” said CFO Matt Batteh on the call.
