Forward Air, an asset-light service, followed the trend of other LTL carriers in reporting rising sequential volumes in August. The demise of Yellow Corp. was a major factor in the turn of events.
For the first two months of the third quarter, Forward (NASDAQ: FWRD) reported a 3% decrease in tonnage for its expedited freight sector, which comprises LTL, truckload, and last mile. In contrast to July’s 5.9% drop, August’s y/y tonnage was flat.
The decrease in tons shipped in the second quarter was less severe than what we see here. Forward said that tonnage increased by almost 7% in the days preceding the August 2 report, which coincided with Yellow’s shutdown.
A Look at Forward’s Q3 Performance
Company efforts have focused on expanding into the high-value LTL freight industry, which often involves heavier shipments. Weight per shipment is up 7.8% year over year so far in the third quarter, which is higher than the 5.4% rise recorded in the second quarter.
Tom Schmitt, chairman, president, and CEO, stated that in August, positive momentum in volumes was observed. There is a continuation of the increase in volumes observed in the first few days of September.
Forward’s quarterly statements don’t give a lot of information about how much money the company has. The company said that, without fuel fees, shipment revenue was up 0.9% and revenue per ton mile was up 2.2%.
Table: Company reports
Forward’s Q3 Outlook: A Challenging Road Ahead
The company’s second-quarter results were less than expected, and its outlook for the third quarter was even worse than expected.
For the next quarter, it expected sales to go down by 11–21%, while the number of tons sold was expected to go up by 5% year over year. That means that September needs to grow by almost 20% from the same month last year. Since the bottom of the market was reached at the end of the summer, it’s been easier to compare it to the same time last year. Forward’s September 2022 volume number was not very good.
Forward’s August Sales and the Impact of the Omni Logistics Acquisition: A Market Reaction
At the beginning of August, the sales estimate was made public. Management says that the number of tons in August was up 7% from the same month last year. But a week later, it announced that it had bought Omni Logistics, a client in the freight handling business. Investors and the people who had bought from Forward before were clearly upset. After the news came out, the stock price dropped by a lot (more than 40%), and by Thursday it was 36% lower than it had been before.
Customers’ comments were also scary, and several said they would go somewhere else if they needed more space. Forward has always provided linehaul capacity to forwarders, but it is now starting a moving division that will sell straight to customers.
Forward’s Promise to Customers and Investors: Navigating a Delicate Period
Forward has promised its customers and investors that it will not share its customer or shipping information with Omni, and it will keep its sales staff separate from Omni. Some of those older users might have started sending their packages somewhere else, but it’s not clear if that’s true.
According to Schmitt, during an investor conference on Wednesday, it has been a challenging and delicate period with their domestic forwarder customers. However, he mentioned that these customers are still placing their trust in their business.
Higher gas prices could make it easier for the company to meet its sales goals for the third quarter. Management said that lower fuel prices and the need to be more cautious when making predictions were two reasons why they didn’t expect to make as much money as they thought they would. Since the end of the second quarter, diesel prices per gallon have gone up by more than 20%.
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