Thomas Wadewitz

Thomas Wadewitz questioned the impact of non-domiciled CDL changes on TFI's specialty flatbed segment compared to dry van, considering the unique skill sets required. He also sought clarification on the US LTL Q1 2026 shipment outlook, specifically if 'flat' meant sequential or year-over-year, and the drivers behind any activity improvement.

Answer

CEO Alain Bédard noted that the CDL impact is more pronounced in the van sector than in specialty truckload due to the latter's unique skill requirements. He attributed revenue per mile improvements to supply constraints rather than demand. CFO David Saperstein clarified that US LTL shipments could be flat year-over-year in Q1, driven by sales and service improvements, though pricing pressure might affect revenue per shipment. Mr. Bédard added that $5-$6 million in weather-related costs were exceptional for Q1.

Thomas Wadewitz questioned the impact of non-domiciled CDL changes on TFI's specialty flatbed business versus dry van, seeking clarity on capacity reduction and pricing effects. He also asked for clarification on the Q1 U.S. LTL shipment forecast and the drivers of activity improvement, as well as the full quarter impact of weather.

Answer

Chairman, President, and CEO Alain Bédard noted less direct benefit from CDL changes in specialty truckload compared to dry van due to unique skill sets, but still sees overall revenue per mile improving. CFO David Saperstein clarified the Q1 U.S. LTL shipment forecast is potentially flat year-over-year, driven by sales and service improvements, but pricing pressure remains. He estimated a $5-$6 million weather impact in Q1, beyond normal seasonal effects.

Thomas Wadewitz asked if it was fair to say that U.S. LTL improvement is now more dependent on a market recovery than on TFI's internal levers. He also inquired if increased industry capacity from competitors was pressuring TFI's shipment volumes.

Answer

Executive Alain Bedard disagreed, asserting that significant internal cost-saving levers remain within TFI's control. He cited upcoming improvements in fleet management, a major P&D software update, and a new billing system to fix long-standing issues. Regarding competition, Bedard acknowledged that adding capacity to a weak market will inevitably create long-term price pressure, but he did not attribute TFI's Q4 issues directly to a worsening competitive environment.

Thomas Wadewitz (UBS) questioned the level of pricing improvement needed in the truckload segment to achieve meaningful margin expansion in 2026, considering potential driver inflation and ongoing cost control efforts.

Answer

CEO Adam Miller explained that early in the bid season, Knight-Swift is prioritizing volume wins with low single-digit pricing to improve utilization and fixed cost absorption, which helps manage inflation. He anticipates pricing will strengthen as capacity tightens later in 2026. Miller noted that driver inflation will be market-dependent, but overall margin improvement in 2026 is expected to be a combination of volume (earlier in the year) and price (later in the year), with opportunities in the spot market to capture faster rate movements.

Thomas Wadewitz inquired about the pricing needed to improve truckload margins in 2026, considering ongoing cost control efforts, potential driver inflation, and the overall inflation environment.

Answer

CEO Adam Miller explained that early in the 2026 bid season, the focus is on securing healthy volume wins with low single-digit pricing, which can improve margins through fixed cost absorption and improved utilization. He noted that pricing would likely grow if capacity tightens as expected, and driver inflation is market-dependent. He concluded that 2026 margin improvement would be a combination of volume (earlier in the year) and price (later in the year, leveraging the spot market).

Thomas Wadewitz asked for more color on how a potential 25-30% decline in West Coast container imports would flow through to Knight-Swift's business and how this scenario is reflected in the updated guidance.

Answer

Executive Adam Miller confirmed the guidance assumes a weaker May due to the expected drop in West Coast imports, which would primarily impact the Knight and Swift truckload brands and the Intermodal business. He explained the company is working to limit capacity in affected markets. Miller noted the key uncertainty for the quarter is whether a rebound in June, driven by replenished inventories and normal seasonality, will offset the anticipated weakness in May.

Thomas Wadewitz asked for more perspective on the key assumptions driving the significant earnings jump guided for Q2 2025 versus Q1, particularly regarding LTL cost fallout and the expected lift from contract rates in Truckload.

Answer

Adam Miller, an executive, explained the Q1 to Q2 lift is driven by normal Truckload seasonality, favorable bid season momentum with rate increases, and significant LTL improvement. The LTL gains come from putting DHE integration costs behind them in Q1 and building volume density in new facilities. Intermodal is also expected to turn profitable in Q2. Miller confirmed stronger-than-normal seasonality in LTL due to self-help initiatives.

Thomas Wadewitz from UBS Group AG asked for management's outlook on the truckload cycle for the upcoming year, questioning if a gradual turn or a more rapid inflection is expected.

Answer

Executive Adam Miller projected a gradual "grind upwards" for the truckload market, with low-to-mid single-digit rate improvements building throughout 2025, rather than a sharp inflection. Executive Andrew Hess added that the company is already capturing positive rate increases in early bids, a more favorable position than the prior year.

Thomas Wadewitz asked for the base case outlook for Q2 Intermodal volumes versus Q1, the forward trajectory for ITS and Logistics operating margins, and the key long-term levers for improving Intermodal profitability.

Answer

Executive Phillip Yeager indicated Q2 Intermodal volume is likely to be down sequentially but still up year-over-year, depending on the timing of the import slowdown. CFO Kevin Beth projected normal seasonal margin improvement in Q3 and Q4, but noted Q2 is uncertain. For long-term Intermodal margins, Yeager highlighted network velocity, insourcing drayage, and chassis programs, reiterating a mid-cycle target of 5-6% operating margin.

Thomas Wadewitz asked if the Q1 purchased services expense was a good run-rate and inquired about the drivers for expected growth in the Petroleum & Chemicals (P&C) segment.

Answer

CFO Ghislain Houle stated that the variance in purchased services was minimal and not unusual. CCO Remi Lalonde attributed the P&C growth outlook to a combination of a favorable economic backdrop, market share wins, and specific growth initiatives like the expanding NGL business and the successful refined fuels franchise project into Toronto.

Thomas Wadewitz asked about headcount expectations for 2025, questioning if it would be flat at the low end of the volume outlook, and inquired about the forecast for compensation and benefits per worker.

Answer

Chief Field Operations Officer Derek Taylor noted that 800 furloughed employees provide a buffer, allowing for volume growth at low incremental cost with only targeted hiring in the West. CFO Ghislain Houle confirmed that the company assumes a 3% wage increase, consistent with the established pattern in Canada.

Thomas Wadewitz from UBS asked if there is an opportunity to adjust the operating plan, perhaps by focusing more on train length in the carload business, if market weakness persists.

Answer

President and CEO Tracy Robinson clarified that the scheduled operating plan's primary principle is on-time departures, not holding trains to build length. However, the plan is designed to create long, productive trains that still depart on schedule. Chief Field Operations Officer Derek Taylor added that they do make tactical adjustments, including taking out train starts when volume dictates.

Thomas Wadewitz asked for more detail on the strategy to increase the use of owner-operators to make the network business more asset-light, questioning its stability. He also asked for thoughts on the resilience of small carriers compared to large ones.

Answer

CEO Mark Rourke clarified the strategy applies to the network business, not Dedicated, and involves supplementing a core company driver fleet with both owner-operators and their Power Only offering. He acknowledged the current stress on owner-operators but highlighted Schneider's value proposition. Regarding small carriers, Rourke agreed the capacity correction has been 'a bit more stubborn' but is still occurring, attributing some small carrier resilience to greater access to technology and price discovery, though fundamentals still apply.

Thomas Wadewitz of UBS Group AG inquired about the assumptions underpinning the Q4 earnings guidance, including views on peak season and potential pull-forward effects from West Coast imports. He also asked for a breakdown of the sequential decline in Truckload segment operating income from Q2 to Q3.

Answer

CFO Darrell Campbell and CEO Mark Rourke explained that the Q4 forecast assumes typical holiday seasonality and secured project work at improved margins. They acknowledged some Q3 volume pull-forward on the West Coast. The Q2-to-Q3 decline in Truckload operating income was attributed to moderating seasonality in late Q3 after a strong July, coupled with higher insurance costs and lower network volumes, though the Dedicated business showed resilience.

Thomas Wadewitz of UBS asked about the drivers of the sequential headcount decline and future expectations. He also inquired if the company is becoming more aggressive on volume by leveraging its Robinson Managed Solutions (RMS) capabilities to win bundled brokerage business.

Answer

CEO David Bozeman attributed some of the headcount decline to the divestiture of the European Surface Transportation business and reiterated a focus on "evergreen productivity." Michael Castagnetto, President of NAST, clarified the strategy is about being "smarter," not just more aggressive, by deliberately combining RMS and brokerage services under the "One Robinson" strategy, which has been positively received by customers.

Thomas Wadewitz asked for the outlook on truckload volume growth in 2025 and whether a market tightening would lead to a gradual volume recovery or a more significant, sudden swing.

Answer

President of North American Surface Transportation Michael Castagnetto emphasized the 'optionality' the company has due to its disciplined approach. While declining to predict the timing of a market inflection, he expressed confidence that C.H. Robinson has the tools and talent to capitalize on it. He stated the nature of the volume recovery would depend on the type of inflection, but the company is prepared for either a gradual or rapid turnaround.

Thomas Wadewitz asked for commentary on the outlook for NAST's operating and gross margins in Q4 and the primary drivers for these metrics in 2025, questioning whether they would be more market-driven or company-specific.

Answer

Michael Zechmeister, President of North American Surface Transportation, stated the company will continue to control what it can, expressing confidence in productivity initiatives aimed at a 30% improvement over two years. CEO Dave Bozeman added that the company is building operational muscle to prepare for a market rebound and is focused on achieving "higher lows" during the current downcycle through continuous improvement.

Thomas Wadewitz of UBS requested more perspective on the size and scope of the Canada-Mexico trade opportunity, asking for examples beyond the Energy, Chemicals, and Plastics (ECP) sector.

Answer

EVP & CMO John Brooks explained that while the ECP space has led the way, they are in the early innings of developing opportunities in other areas like steel and grain. President & CEO Keith Creel provided a specific example of a recent 3,000-mile unit train of oats from Saskatchewan to Mexico, highlighting the potential if regulatory hurdles like fumigation requirements are removed.

Thomas Wadewitz inquired about the expected pace of operating ratio (OR) improvement in 2025 and the potential for further gains in the years beyond.

Answer

EVP and CFO Nadeem Velani indicated that despite normal Q1 seasonality, a more favorable operating environment should drive year-over-year OR improvement. He sees a clear path to a sub-60% OR for the full year, supported by pricing above inflation, volume leverage, and network productivity gains. For the long term, he reaffirmed the Investor Day goal of approximately 100 basis points of OR improvement annually, driven by continuous operational excellence.

Thomas Wadewitz inquired about the most promising markets for growth in 2025 and how specific capacity investments are enabling those opportunities.

Answer

EVP and CMO John Brooks identified International Intermodal, the MMX North-South service, and carload business as key growth drivers for 2025, driven by self-help initiatives rather than macro reliance. EVP and COO Mark Redd added that capital investments are targeted to support this growth. Key projects include doubling capacity at the Laredo Bridge by year-end and streamlining the Kansas City hub to bypass congestion, which directly enables John's team to sell more business with service reliability.

Thomas Wadewitz asked about the customer mix between SMB and enterprise, competition for SMB freight, and whether to expect a normal seasonal demand pickup in May and June given tariff uncertainty.

Answer

Chief Financial Officer Matt Beasley confirmed that SMB is a major focus, particularly in the Asset-Light segment where it has improved profitability. He stated that the company expects a continued sequential pickup in shipments in line with historical seasonality, which will drive revenue and the guided operating ratio improvement.

Thomas Wadewitz inquired about the potential impact on the competitive landscape from FedEx's plan to spin out its freight division and increase its focus on the SMB market. He also asked about ArcBest's own sales approach to different customer segments.

Answer

CEO Judy McReynolds characterized FedEx as a strong competitor but expressed confidence in ArcBest's ability to succeed with its integrated, multi-solution approach that helps customers navigate disruptions. President Seth Runser added that aligning sales, marketing, and yield under one leader will improve execution and capitalize on opportunities across all segments, not just one. He highlighted the growth in managed solutions and the unified approach as key to strengthening their go-to-market strategy.

Thomas Wadewitz from UBS requested a ballpark estimate of the dynamic pricing mix versus core LTL and asked for perspective on the magnitude of freight shifting from LTL to the truckload market.

Answer

President Seth Runser declined to provide a specific mix but stated the majority of business is core and that dynamic pricing provides network consistency. Executive Christopher Adkins acknowledged the LTL-to-truckload shift, driven by their managed business, but did not provide a precise magnitude, stating the company is prepared to manage its business in any environment.

Thomas Wadewitz asked for details on the timing and flow of the $3.5 billion in cost savings related to the Amazon volume reduction, and whether these savings would fully offset the corresponding revenue decline.

Answer

CFO Brian Dykes explained that the savings will ramp up through the year. Variable and semi-variable costs will align with the Amazon volume decline (16% in H1, 30% in H2), while fixed costs are more back-half weighted. Dykes confirmed they are taking out more cost than the "nonnutritive" revenue being lost and that incremental reductions will continue into 2026. CEO Carol Tomé added that the 'Efficiency Reimagined' savings are a separate initiative to improve overall productivity.

Thomas Wadewitz asked for details on the $3.5 billion cost-out plan, including its timing throughout the year, whether it fully offsets the Amazon revenue reduction, and how it might extend into 2026.

Answer

CFO Brian Dykes explained that variable and semi-variable cost savings will align with the Amazon volume decline, which is more weighted to the second half, while fixed costs are also back-half loaded. CEO Carol Tomé confirmed the Amazon volume decline accelerates in the second half. Dykes added that incremental cost reductions will continue into 2026 and that the plan removes more cost than the unprofitable revenue being lost.

Thomas Wadewitz of UBS inquired about how UPS can ensure it can remove fixed costs rapidly enough to achieve margin expansion despite the significant revenue decline from reducing Amazon's volume.

Answer

CEO Carol Tomé explained the strategic decision to reduce Amazon's volume, noting it's their largest but not most profitable customer, and the move prevents diminishing returns. CFO Brian Dykes added that a network reconfiguration is underway to align the fixed asset base (buildings, vehicles, aircraft) with new volume levels, with more details to come. EVP and President, U.S. Nando Cesarone provided confidence by stating that 5 facilities were already partially or completely closed in January, with 140 Network of the Future projects active in 2025.

Thomas Wadewitz questioned how much of the 2025 margin improvement is within UPS's control and if internal initiatives can drive expansion even if the industrial economy remains weak.

Answer

CEO Carol Tomé and Executive Kathleen Gutmann highlighted the International segment's ability to expand margins despite macro weakness by improving capabilities, such as Saturday delivery in Europe, and optimizing the network. For the U.S. Domestic segment, CFO Brian Dykes stated that the known labor cost structure, combined with a focus on revenue quality and productivity, provides significant control over margin outcomes regardless of the macro environment.

Thomas Wadewitz of UBS asked how much of the path to operating ratio (OR) improvement is dependent on a better freight market versus factors within Saia's control, like cost management. He also inquired about the LTL pricing outlook and whether it could turn negative.

Answer

President and CEO Fritz Holzgrefe stated that while modest OR improvement is possible through controllable cost levers, reaching a target like a 75% OR would require market help. He affirmed that the company is focused on managing from the current baseline without expecting a near-term market step-up. Regarding pricing, he expects the environment to remain stable and rational, driven by inflationary cost structures across the industry, and does not foresee a turn to negative pricing.

Thomas Wadewitz of UBS asked for more details on the Q1 operating ratio (OR) outlook, noting it seemed worse than typical seasonality, and questioned when year-over-year OR improvement might resume as the company laps new terminal openings.

Answer

CEO Fritz Holzgrefe attributed the Q1 OR headwind to the 21 new terminals opened in 2024, which are not yet at company-average efficiency. Executive Matthew Batteh added that accelerated equipment delivery is also increasing depreciation expense. Fritz Holzgrefe stated he expects OR improvement to progress throughout the year to meet the full-year target of 80-100 basis points of improvement, implying stronger performance in the subsequent quarters.

Thomas Wadewitz from UBS questioned the potential for margin improvement in 2025, even with a stable macro environment. He also asked about the levers to manage freight mix and how quickly Saia could return to its strategy of improving weight per shipment.

Answer

CEO Fritz Holzgrefe expressed confidence in expanding the operating ratio in 2025, even in a tepid environment, suggesting a 100-150 bps improvement is in scope. He emphasized that the focus remains on pricing across all business segments. Holzgrefe explained that the new national network provides more opportunities to reinforce value with customers, which is the primary way to improve mix over time, rather than a quick fix.

Thomas Wadewitz asked about the potential resilience of premium cabin demand in a recession and what macro indicators would cause concern. He also inquired about the company's approach to second-half capacity and what might trigger more aggressive cuts.

Answer

Executive Andrew Harrison stated they are "not seeing any pressure" in the front cabin, attributing its strength to the network's long stage length. Executive Ryan St. John added that they expect premium to continue to outperform the main cabin even in a downturn. On capacity, Harrison noted they are already looking at fall cuts, and CEO Benito Minicucci affirmed their history of responding quickly to downturns with appropriate action.

Thomas Wadewitz of UBS asked why the 2025 guidance was not raised despite the significant Q4 earnings beat and a favorable industry backdrop. He also sought to clarify if the positive factors in Q4 and Q1 were one-time events or continuing trends.

Answer

CFO Shane Tackett explained that while the company is confident, it is still early in a complex integration, and the current guide represents a number they are confident in delivering. He noted that achieving no margin dilution and EPS growth in the first year of an integration is a significant goal. Tackett clarified that about half of the Q4 beat ($0.25 of EPS) was from core business strength, which is a continuing trend, while the other half came from one-time items like a tax true-up and non-op expense benefits.

Thomas Wadewitz of UBS inquired if there is a specific revenue or volume growth threshold required to achieve the high single-digit EPS growth target and asked what levers would drive acceleration from a flat Q1.

Answer

CEO Vincenzo Vena stated that while there are many variables, the company is not providing a specific volume threshold. He emphasized that Q1 performance was strong when excluding fuel and leap year impacts and that the company will rely on pricing, volume, and efficiency as key levers to achieve its long-term goals.

Thomas Wadewitz of UBS inquired about management's assumptions for the truckload market in 2025 and its potential impact on pricing. He also asked for the outlook on intermodal revenue per unit, which has been a headwind.

Answer

EVP of Marketing and Sales Kenny Rocker noted that market data suggests a truckload market improvement as the year progresses, which should provide an uplift for intermodal pricing. CFO Jennifer Hamann confirmed that the recent drag on revenue per unit was primarily driven by business mix (higher growth in lower-revenue international) and lower fuel surcharges.

Thomas Wadewitz asked about the importance of retail customers, the competitive threat from Amazon's LTL service and UPS's hundredweight product, and whether retail freight is more exposed to import tariffs.

Answer

CEO Kevin Freeman characterized Amazon's LTL offering as an opportunity rather than a threat. CFO Adam Satterfield added that retail constitutes 25-30% of business and that ODFL's high service levels are a key advantage for retailers with strict on-time delivery programs. He also noted near-shoring trends as a long-term opportunity.

Thomas Wadewitz inquired about the importance of retail customers, competitive threats from Amazon or UPS in that segment, and whether retail demand is more exposed to import and tariff risks.

Answer

CEO Kevin Freeman stated he sees Amazon's LTL offering as an opportunity, not a threat. CFO Adam Satterfield added that retail is 25-30% of business and ODFL's superior service (99% on-time) is a key advantage for retailers with strict delivery standards, positioning the company to benefit from e-commerce trends.

Thomas Wadewitz asked for thoughts on where pricing might bottom and how cost inflation is impacting margins, particularly if shipment volumes were to stabilize.

Answer

CFO Adam Satterfield explained that ODFL doesn't think in terms of a pricing 'floor' because they consistently seek increases to offset cost inflation. He reiterated their goal of a 100-150 basis point spread of price over cost. He emphasized that a recovery in volume (density) is the most critical factor for leveraging costs and improving margins.

Thomas Wadewitz asked if recent share gains included business won from other railroads, not just trucks, and which specific segments, like autos or metals, are most in focus regarding potential tariff impacts.

Answer

CCO Ed Elkins confirmed that share gains in merchandise markets are coming from a variety of sources, including other competitors. On tariffs, he acknowledged autos as a market with potential tailwinds (more domestic production) and headwinds, but stressed it's hard to predict. CEO Mark George added that the bigger risk is a broader economic slowdown, noting that only a small, low-single-digit percentage of revenue is tied to China.

Thomas Wadewitz from UBS Group AG asked if share gains were coming from rail competitors in addition to truck, and which segments were most exposed to potential tariff impacts.

Answer

CCO Ed Elkins confirmed share gains are from various sources, including competitors, driven by service. On tariffs, CEO Mark George contextualized the risk, stating a broader economic slowdown is a greater concern, given that 75% of business is domestic and direct China revenue exposure is in the low single digits.

Thomas Wadewitz questioned if the optimism for stronger chemical volumes stems from general market improvement or specific market share gains, and asked for examples of customers rewarding Norfolk Southern with new business.

Answer

CMO Ed Elkins confirmed it is both, stating they are specifically targeting wallet share in the chemicals segment where customers had previously suffered from service issues. He noted improved network agility also allows them to capture spot opportunities, as seen in agriculture. He affirmed they have a direct line of sight to specific wallet share opportunities.

Thomas Wadewitz asked for a high-level outlook for 2025, questioning if productivity gains could drive margin improvement even if industrial markets remain weak.

Answer

CEO Mark George stated that on the controllable cost side, the company will beat its $150 million reduction target for 2025. He noted that while the top line is uncertain, share recapture opportunities can mitigate market softness. COO John Orr and CMO Ed Elkins added that confidence is high due to field-led improvements and a stronger service product.

Thomas Wadewitz of UBS Group AG inquired about the state of intermodal yields, asking if they have reached a bottom and what the timing might be for stronger pricing and revenue per unit (RPU).

Answer

Ed Elkins, Chief Marketing Officer, explained that intermodal price and mix weakness was driven by the premium segment and an increase in empty shipments. He stated his belief that rates are "bouncing right along the bottom" and that an anticipated peak season bodes well for both international and domestic segments, with domestic RPU expected to move sideways in the near term.

Thomas Wadewitz asked for a breakdown of the operational challenges, questioning the relative impact of the Howard Street Tunnel project versus weather and other execution issues, and inquired about the timeline for performance improvement.

Answer

CEO Joseph Hinrichs explained that the issues stem from "significant compounding events" over several months, not a single factor. He outlined a recovery plan focused on reducing cars online, adding locomotives, and adjusting capital projects. Hinrichs stated the goal is to show improvement through Q2 and achieve a full reset in Q3.

Thomas Wadewitz inquired about the potential for full-year margin improvement in 2025, particularly in the second half, given the significant headwinds expected in the first half.

Answer

EVP and CFO Sean Pelkey stated that while first-half margin improvement is unlikely due to commodity price and other headwinds, it is 'quite possible' to see margin growth in the second half. This outlook assumes a stable operating environment and the achievement of low to mid-single-digit volume growth, which would leverage the network's available capacity.

Thomas Wadewitz asked about the sensitivity of CSX's long-term industrial development projects to the economic cycle and the risk of potential slowdowns.

Answer

CCO Kevin Boone acknowledged that economic conditions can influence project timelines, citing recent EV-related announcements as an example. However, he affirmed high confidence in the overall pipeline, stating that for many large projects, construction has already begun, which provides significant visibility that they will proceed to completion.

Thomas Wadewitz of UBS inquired about the potential impact of an economic downturn on the timing of union agreements and whether a change in consumer mix could support international resilience in a recession.

Answer

CEO Scott Kirby affirmed that employees deserve industry-leading contracts regardless of the economic environment and that they are close to an agreement with flight attendants. EVP and CCO Andrew Nocella and EVP and CFO Mike Leskinen both noted that the high-end consumer seems less impacted so far and that a mix shift towards more premium leisure travel is providing resilience.

Thomas Wadewitz inquired about demand trends in the Canada-U.S. and Mexico-U.S. markets following earlier tariff news. He also asked about the potential risk to the transatlantic market if European-originating travel to the U.S. were to decline sharply.

Answer

President Glen Hauenstein confirmed a significant drop-off in bookings from Canada and mixed results from Mexico, stating they will likely reduce capacity to both. For the transatlantic market, he noted that U.S. point-of-sale accounts for 80% of long-haul revenue, and while they are mindful of a potential drop in European demand, it represents a smaller portion of their business and has not materialized yet.

Thomas Wadewitz of UBS asked about the source of the significant growth in deferred ground volumes, its potential link to competitor changes, and the search for a new LTL leader.

Answer

EVP and CCO Brie Carere attributed the growth to the competitive value proposition of the FedEx Ground Economy product, including features like picture proof of delivery. She noted new economy customers are also bringing other, higher-revenue packages. President and CEO Rajesh Subramaniam stated a comprehensive search is underway for a new FedEx Freight CEO.

Thomas Wadewitz of UBS asked if the standalone FedEx Freight (LTL) business would become more volume-focused and compete more aggressively on price in the future, potentially shifting from its recent focus on margin improvement.

Answer

EVP and Chief Customer Officer Brie Carere responded that while the team will maintain its revenue quality discipline, the company does see an opportunity to 'play offense.' She mentioned plans to invest in new salespeople and strategically pursue opportunities in different industrial mixes, the 3PL market, and using technology to fill network capacity. She confirmed the network can comfortably handle more volume, signaling a more aggressive growth strategy.

Thomas Wadewitz asked about the significant increase in purchase transportation (PT) costs, questioning if there was a profitability issue with International Economy services and how the company plans to manage this expense line going forward.

Answer

EVP and CFO John Dietrich detailed the drivers of the PT increase, including higher logistics revenue, normal rate inflation, and a $120 million increase for commercial air linehaul capacity related to International Economy growth and Tricolor investments. He clarified that while the volume mix pressured margins, the International Economy growth was contributory to year-over-year profit and not loss-making.

Atul Maheshwari, on for Tom Wadewitz, asked for perspective on the performance gap, in terms of RASM or profit margins, between immature and mature markets to help dimensionalize the potential upside from maturation.

Answer

CEO Barry Biffle quantified the impact, stating that new capacity typically takes a 30-35% RASM hit in its first year. With 20% of the network being new, this created a 6-7% system-wide drag, which will mechanically reverse as the network matures. President James Dempsey added that the company is aggressive in managing its network, cutting underperforming new routes quickly. Routes that are retained are on a clear trajectory to meet or exceed the network average RASM.

Asked about the competitive dynamics in the local LTL market, particularly in light of changes at competitors like FedEx Freight, and inquired about the expected range for incremental margins, especially in a potential market up-cycle.

Answer

The company views competitor changes as reinforcing positive industry dynamics. They compete for local business by providing superior service and building relationships. For 2025, incremental margins are expected to be comfortably above 40%, driven by strong yield. With 30% excess capacity, they are well-positioned to capture volume and drive strong margins in a recovery.

Thomas Wadewitz from UBS asked for a perspective on a 'normalized' LTL pricing environment for 2025, suggesting 4-5%, and whether the company could continue to outperform this level.

Answer

CSO Ali-Ahmad Faghri confirmed expectations to continue outperforming the market on price. Executive Mario Harik added that a 4-5% market pricing assumption for next year is reasonable. He explained the company's outperformance is driven by pricing 100-200 basis points above inflation, plus an additional 1.5 points from accessorials and local account mix.

Thomas Wadewitz sought perspective on Q1's typical contribution to full-year EBITDA to help model 2025. He also asked if RXO's technology could drive a quick improvement in Coyote's lower gross margin, or if the margin difference is more structural.

Answer

CSO Jared Weisfeld confirmed Q1 is seasonally the lowest point for EBITDA but was hesitant to provide a specific percentage for the new combined business, citing the uncertain shape of the market recovery. CEO Drew Wilkerson explained that Coyote's gross margin profile is structurally different due to a large enterprise customer, but RXO's technology and scale are expected to improve margins in Coyote's SMB and middle-market segments over time.

Thomas Wadewitz asked why JetBlue's Q1 RASM outlook appears weaker than the industry and when its performance might align with peers. He also inquired about the key drivers and timing for achieving free cash flow breakeven.

Answer

President Marty St. George attributed the Q1 RASM outlook to a greater competitive capacity headwind (3% for JetBlue vs. <1% for peers) and noted the full-year improvement depends on executing the JetForward plan, not on external market shifts. CFO Ursula Hurley stated that achieving positive free cash flow is a top priority after reaching sustained profitability and is achievable within the JetForward program's timeframe, which would then enable debt reduction.

Thomas Wadewitz asked about the Intermodal volume outlook for 2025, questioning whether growth could continue against difficult 2024 comparisons and which verticals might drive it.

Answer

Darren Field, President of Intermodal, expressed confidence in continued growth, citing the large addressable market of highway freight suitable for conversion. He identified growth opportunities in the Eastern network as the truck market tightens, from West Coast transloading, and from the expanding Mexico market, all supported by their strong service proposition.

Thomas Wadewitz requested more detail on what management means by a "normal peak season" for Intermodal, asking if it refers to seasonal trends or something else, given strong but potentially temporary import data.

Answer

Darren Field, President of Intermodal, clarified that "normal" refers to the return to pre-pandemic sequential volume patterns and improved customer forecast accuracy. He stated that while some volume was pulled forward, it was not an overwhelming factor, and they expect continued strong demand from Southern California.

Thomas Wadewitz of UBS asked for insights on the pace of carrier attrition in the market and its potential to drive improvement in the truckload market. He also questioned the reasons for the Q4 earnings guidance being lower than Q3's reported earnings.

Answer

CEO Frank Lonegro noted that regional tightness from recent hurricanes suggests the market is getting closer to balance, but a catalyst is still needed to accelerate attrition. He cited uncertainties around trade, tax, and Fed policy as reasons for a continued slow bleed-out of capacity. CFO James Todd explained the Q4 EPS guidance difference, attributing it primarily to a $0.04 one-time tax benefit in Q3, slightly lower sequential revenue expectations, and a minor negative impact from interest rate cuts on the company's cash balance.