Summary Section Less-than-truckload carrier Saia has reported a significant decline in its first-quarter earnings per share, falling short of market expectations due to uncertain macroeconomic conditions and lower-than-expected demand. The company's revenue increased by 4.3% year over year, but the yield metric declined by 5.8%, largely driven by a 7.8% increase in weight per shipment. Saia's operating ratio was notably worse than management's guidance, with costs from new terminals and poor weather contributing to the decline.
Earnings Miss Reflects Trade Uncertainty
Saia, a leading less-than-truckload (LTL) carrier based in Johns Creek, Georgia, reported first-quarter earnings per share of $1.86 before the market opened on Friday. This result fell significantly short of the consensus estimate of $2.76 and was also lower than the $3.38 earnings per share the company posted in the same period last year. Analysts had lowered their expectations in the days leading up to the report, driven by growing concerns over trade tensions.
The decline in Saia's earnings per share is attributed to a number of factors, including a failure to see the typical sequential growth in shipments during the quarter. Despite this, Saia's revenue increased 4.3% year over year, reaching $788 million. However, a closer examination of the company's financials reveals a decline in the yield metric, which fell 5.8% year over year (5.1% lower excluding fuel surcharges). This decrease is largely attributed to a significant increase in weight per shipment, which rose by 7.8%.
"Primarily resulting from an uncertain macroeconomic environment, we did not see the typical sequential growth in shipments through the quarter, with March shipments flat to February, causing our first-quarter revenues to fall well below our expectations," President and CEO Fritz Holzgrefe stated in a news release.
Operational Highlights
Saia's tonnage per day increased by 12.8% year over year, primarily due to recent terminal openings. However, revenue per hundredweight (or yield) declined, reflecting the negative impact of increased weight per shipment on the company's average haul size. This development is concerning for Saia and other LTL carriers, as it can be a significant drag on profitability.
The table below provides an overview of Saia's key performance indicators:
| Metric | Q1 2023 (Actual) | Q1 2022 (Actual) | Change | | ---- | --- | --- | --- | | Revenue ($ million) | 788 | 755 | +4.3% | | Tonnage per day | 12,800 | 11,300 | +13.6% | | Yield ($/100 lbs) | 18.55 | 19.86 | -5.8% | | Weight per shipment (lbs) | 17,350 | 16,000 | +7.8% |
Costs and Profitability
Saia's operating ratio was significantly worse than management's guidance, with an OR of 91.1%, representing a 670 basis point (bp) decline year over year. Costs associated with new terminal openings and poor weather conditions in January contributed to this decline. Specifically, salaries, wages, and benefits expenses rose by 410 bps as a percentage of revenue, while depreciation expense increased by 100 bps.
Furthermore, Saia experienced a significant swing from net interest income to net interest expense in the quarter. This resulted in an additional drag on earnings per share of 13 cents. The company's net debt also increased by $207 million year over year, financing new terminal acquisitions.
Conclusion In conclusion, Saia's disappointing first-quarter results reflect the challenging operating environment driven by trade uncertainty and lower-than-expected demand. While the company's revenue showed a modest increase, its yield metric declined significantly due to higher weight per shipment. Saia will need to navigate these challenges effectively in order to restore investor confidence and achieve improved profitability.