Reed Seay

Reed Seay followed up on consolidation, asking if it refers to LTL carriers and if any of the $200 million LTL impact is due to rationalizing less profitable freight before the spin-off.

Answer

President and CEO Raj Subramaniam clarified that consolidation refers to capacity reduction in the truckload business, which is expected to eventually benefit the LTL sector. EVP and CFO John Dietrich added that FedEx Freight is seeing a positive inflection in yield, the first increase in several quarters, reflecting pricing discipline.

Reed Seay followed up on the discussion of consolidation, asking if it refers to LTL carriers and if any of the $200 million LTL impact is due to rationalizing less profitable freight ahead of the spin-off.

Answer

Raj Subramaniam, President and CEO, FedEx, clarified that he was referring to capacity consolidation in the truckload business, which is expected to eventually benefit the LTL sector. John Dietrich, EVP and CFO, FedEx, noted a positive inflection in LTL yield, marking the first increase in several quarters, which reflects disciplined pricing.

Reed Seay from Stephens asked if Old Dominion Freight Line is observing any market changes or impacts from competitors' investments in service and network, or from a peer company preparing for a spin-off.

Answer

Adam Satterfield, CFO, stated that Old Dominion Freight Line has not observed significant market changes from competitors' investments, citing the Mastio study which shows the company maintaining a wide lead in service, ranking number one in 23 out of 28 attributes, and emphasizing their continuous focus on service and employee training.

Reed Seay asked if Old Dominion Freight Line is observing any changes in the market due to competitors' investments in service and network, or impacts from peers preparing to spin off from parent companies.

Answer

Adam Satterfield, CFO, referenced the Mastio study, indicating no significant movement in service gaps between Old Dominion Freight Line and competitors, with Old Dominion Freight Line maintaining a wide lead in 23 of 28 attributes. He noted that despite competitor claims of service improvements, it hasn't been reflected in Mastio data or customer feedback.

Reed Seay asked for an update on inland spot market rates in October, including sequential and year-over-year trends, and the current spread between spot and contract rates. He also sought clarification on the company's full-year earnings guidance, specifically regarding the achievability of the low end of the range.

Answer

David Grzebinski (President and CEO) stated that Q3 spot pricing was down 4-5% with term contracts flat, but spot rates are starting to firm up in Q4. Christian O’Neil (President and COO) added that spot pricing has moved higher since its Q3 drop, and the long-term supply-demand balance remains positive. David Grzebinski confirmed the company expects to be around the low end of its full-year guidance range.

Reed Seay asked for an update on inland spot market rate trends in October, including sequential and year-over-year changes, the current spread between spot and contract rates, and whether the company's full-year earnings guidance remained achievable given recent market softness.

Answer

David Grzebinski, Kirby's Chief Executive Officer, noted that Q3 spot pricing was down 4-5% with term contracts flat, but Christian O’Neil, Kirby's President and Chief Operating Officer, indicated positive momentum in spot pricing in Q4. David Grzebinski confirmed that spot pricing remains above term pricing and that the company expects to be at the low end of its previously provided full-year earnings guidance range.

Reed Seay of Stephens Inc. inquired about the demand drivers behind the recent softness in the inland marine spot market and asked for an update on July pricing. He also questioned whether the strong Q2 power generation revenue was from deliveries or down payments.

Answer

CEO David Grzebinski confirmed a pullback in chemical volumes in July but noted Q3 utilization is still guided to the low 90% range. COO Christian O’Neil added color on seasonal factors and shifting refinery crude slates. On power generation, Grzebinski stated the revenue was from actual deliveries as supply chains improved, highlighting that the backlog still grew 15-20% in the quarter.

Reed Seay asked about the broader truckload market, including temporary tightening, subsequent softening, and insights into capacity exits.

Answer

CEO Frank Lonegro and CFSO Matt Dannegger discussed the encouraging sequential increase in BCO count, the impact of regulatory changes like non-domiciled CDL holders and English Language Proficiency enforcement, and ongoing efforts in BCO recruitment and retention. CFO Jim Todd added that selective pruning of the carrier base has not impacted sourcing ability and has led to wider net revenue margins on brokerage business.

Reed Seay from Stephens Incorporated inquired about the broader truckload market, including temporary tightening, subsequent softening, and insights into capacity exits.

Answer

Frank Lonegro, CEO and President, and Matt Dannegger, Chief Field Sales Officer, discussed the encouraging sequential increase in BCO count, the impact of regulatory changes like English Language Proficiency and non-domiciled CDL enforcement, and the expectation that capacity impacts would unfold over a longer period. Matt Dannegger also highlighted improved gross truck adds and a declining turnover rate.

Reed Seay asked if Knight-Swift gains leverage in contract negotiations for the upcoming year by discussing the observed market tightening and capacity reduction, or if shippers remain hesitant to acknowledge these factors.

Answer

CEO Adam Miller explained that shipper responses to market tightening vary. Some proactive customers may lock in capacity with more favorable contractual rates, while others prioritize immediate best prices and deal with potential network fallout through mini-bids or spot boards. Knight-Swift aims to remain nimble to capture market-driven rate improvements faster than the broader industry.

Reed Seay (Stephens Inc.) asked whether Knight-Swift is gaining leverage in contract negotiations for the upcoming year, given the anticipated capacity tightening, and if shippers are willing to credit this in their pricing discussions.

Answer

CEO Adam Miller stated that shipper responses vary case-by-case. Some forward-looking customers may be willing to secure capacity at more favorable contractual rates, while others prioritize immediate best prices and manage network fallout through mini-bids or spot boards. Miller emphasized Knight-Swift's nimble approach to avoid locking in too much capacity, allowing them to quickly capture market-driven rate changes and improve margins faster than the broader industry when conditions tighten.

Reed Seay, on for Daniel Imbro of Stephens Inc., asked about recent activity in Ryder's warehousing and distribution management business and its potential implications for truckload demand. He also inquired about the competitive landscape and pricing environment in the Dedicated segment.

Answer

Steve Sensing, President of SCS and DTS, reported that warehousing volumes in CPG and omnichannel increased during the quarter, though the sales pipeline is relatively flat. In the Dedicated segment, he acknowledged a competitive environment with decision delays and some lost business in non-specialized areas due to price competition, but affirmed that Ryder maintains price discipline. CEO Robert Sanchez added that Ryder's focus on specialized dedicated provides a different pricing dynamic than standard dry van dedicated.