What we heard on earnings calls: More upbeat customers and some eye-popping numbers
Key takeaways
- Carriers report rising customer demand expectations and stronger freight momentum into the second half of the year.
- Pricing power is improving as fleets push mid- to double-digit rate increases across truckload and LTL segments.
- Tightening supply and better volumes are driving margin gains and stronger operating ratio performance.
Each quarterly earnings season brings with it a 53-ft. trailer full of data points and quotes from carriers large and small. Over the last few weeks, a lot of those have spoken to a wave of optimism from executives—about supply-led improvements in the market, the pricing power that upswing has given many of them, and about the broader demand environment.
On the last of those topics, few data points were as emphatic as this one from XPO Chairman and CEO Mario Harik:
“Every quarter, we do a survey with our top customers,” Harik told analysts on April 30. “Double the number of respondents now expect an acceleration into the back half of the year relative to where they were in the first half of the year. And there were nearly no customers that expect a deceleration in the back half of the year. We haven’t seen those kinds of survey results going back to 2021.”
That sentiment from XPO’s top clients typified many comments from Harik and his peers in the truckload and less-than-truckload sectors. Old Dominion Freight Lines CFO Adam Satterfield and Saia President and CEO Fritz Holzgrefe also said customers have grown more confident as spring has arrived, even in the face of uncertainty around the effects of the Iran war.
“We expected continued strength,” Satterfield said on Old Dominion’s Q1 call, where he and CEO Marty Freeman told analysts they saw little evidence of customers pulling forward activity because of rising costs. “[We] hope that we’ll see a continuation of the buildup not only through June, but this is what we’d expect really from now through September.”
The gathering momentum showed up in many carriers’ first-quarter results when it came to tonnage or weight per shipment. But nearly every executive team that recently reported its numbers said April was even better than March, which was better than February. That is translating into some solid pricing power: Schneider National President and CEO Mark Rourke said on April 30 that his team is looking for 2026 rate renewals to be up mid- to high-single digits, and he added that the company is “acting decisively with the most transactional customers where there is more ground to make up.”
Other carriers are being bolder still and echoed Knight-Swift CEO Adam Miller’s aim of getting to double-digit rate gains. Harik said he wants XPO to beat the industry’s pricing gains should the macroeconomic situation warrant the mid- to high-single digits that Rourke and others are targeting.
Popping operating ratios
Given that many fleets have been running rather lean in recent quarters as the freight recession dragged on, the combination of tightening supply and rising prices looks set to produce some eye-popping gains in some companies’ operating ratios. At TFI International, CFO David Saperstein said the company’s LTL adjusted operating ratio this quarter could be up to 7 percentage points better than that of Q1’s 95.3%.
“Fuel is a part of it only where we have real strong density,” Saperstein told analysts, acknowledging that Q2’s comparison to Q1 will be flattered somewhat by the rough weather in many parts of the country early this year. “It’s really more around the volumes and some of the pricing actions that we’ll be putting through.”
Similarly, Saia’s Holzgrefe sketched the possible Q1-to-Q2 improvement at between 400 and 450 basis points. Helping his teams’ cause, he said, has been the work to build out Saia’s network with a host of new terminals. While most of those are still working toward being profitable on par with established locations, they are bringing more business across Saia’s network and growth to the older centers for the first time in more than a year.
Where to next? With the second quarter likely to deliver solid numbers, it’s understandable that some analysts wanted to look further down the road. On that front, most executive teams delivered the same message: We like what we see, but we’re also mindful that outside factors such as the Middle East conflict, rising inflation, and falling consumer sentiment could throw a spanner in the works.
As Schneider’s Rourke put it: “These factors push more demand risk to the right.”
Despite those risks, Holzgrefe summed up the collective sentiment most succinctly: “I don’t see an impediment short of a broader economic slowdown that would say that we can’t continue to drive margin performance in this business and hit the long-term real value-creating goals […] that we have.”
Ah, yes, that broader economic slowdown thing. Shall we collectively cross our fingers?
About the Author
Geert De Lombaerde
Senior Editor
A native of Belgium, Geert De Lombaerde has more than two decades of experience in business journalism. Since 2021, he has written about markets and economic trends for Endeavor Business Media publications FleetOwner, Healthcare Innovation, IndustryWeek, Oil & Gas Journal, and T&D World.
With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati. He later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post and reported primarily on Middle Tennessee’s finance sector and many of its publicly traded companies.