Tom Wadewitz

Tom Wadewitz asked about the importance of volume growth and market share gains for XPO in the next freight upturn, given industry-wide excess capacity, and inquired about key productivity metrics.

Answer

Mario Harik (CEO, XPO) stated that incremental margins would be 'off the charts' in an upturn, leading to rapid earnings growth. He expects mid-teens tonnage to return to LTL as the industrial economy recovers, with XPO's 30%+ excess capacity enabling it to support customers. XPO aims to increase market share while prioritizing yield improvement. He highlighted that post-Yellow, productivity improved 7% and 5% in subsequent quarters, expecting even faster gains with new AI tools. The key productivity metric is labor hours per shipment, which improved 2.5 points in Q3.

Tom Wadewitz asked about the importance of volume growth and market share gains for XPO in the next freight upturn, and which productivity metrics are key to track.

Answer

CEO Mario Harik explained that in an upturn, XPO expects 'off the charts' incremental margins and rapid earnings growth driven by pricing, volume, and cost dynamics. He highlighted that 10-15% of LTL tonnage is waiting to return as the industrial economy recovers, and XPO's 30% excess capacity positions it to support customers. While aiming to increase market share, the focus is on profitable mix and being the top performer in yield improvement. Key productivity metrics include labor hours per shipment (improved 2.5 points in Q3), pallets per person per hour on docks, stops per hour in P&D, and load average/factor in linehaul.

Tom Wadewitz of UBS asked for more detail on the competitive landscape of the grocery consolidation market and inquired about how many other similar new service opportunities exist in XPO's pipeline for the coming years.

Answer

CEO Mario Harik described the grocery business as a consolidated LTL segment where excellent service is a prerequisite, a strength XPO now possesses. He mentioned that after launching about a half-dozen premium services last year, the company is now focused on building the sales pipeline for each. Harik noted they are about one-third of the way to their goal for accessorial revenue and are contemplating another three to four new premium services, such as expedited offerings and security dividers, over the next couple of years.

Tom Wadewitz congratulated the company on strong results despite a tough rate environment and asked about the drivers of truckload volume growth, specifically whether it's price-driven, aggressive bidding with enterprise customers, or if further acceleration is expected. He also clarified if growth was primarily from SMB or enterprise segments.

Answer

President of North American Surface Transportation Michael Castagnetto explained that truckload volume growth is driven by strong performance in key verticals (retail, energy, automotive, healthcare), drop trailer, cross-border, and small/medium business segments. He highlighted the combination of expert personnel and advanced AI-driven pricing models, which enable the company to strategically win the 'right volume' across both enterprise and SMB customers, rather than just chasing volume.

Tom Wadewitz congratulated the company on strong results despite a tough rate environment and asked about the drivers of truckload volume growth, specifically whether it's price-driven, aggressive bidding with enterprise customers, or if further acceleration is expected. He also clarified if growth was primarily from SMB or enterprise segments.

Answer

President of North American Surface Transportation Michael Castagnetto explained that truckload volume growth is driven by strong performance in key verticals (retail, energy, automotive, healthcare), drop trailer, cross-border, and small/medium business segments. He highlighted the combination of expert personnel and advanced AI-driven pricing models, which enable the company to strategically win the 'right volume' across both enterprise and SMB customers, rather than just chasing volume.

Tom Wadewitz inquired about the timeline for achieving the 40% NAST operating margin target and whether there is a ceiling on NAST gross margin, given the strong recent performance.

Answer

Michael Castagnetto, President of NAST, stated he doesn't see a 'limit' on gross margin potential as the company improves its freight selection. CFO Damon Lee reiterated confidence in the 40% mid-cycle target from the Investor Day commitments but clarified it is not a cap, emphasizing the company will maintain its strategic optionality between market share and profitability.

Tom Wadewitz asked Keith Creel to elaborate on CPKC's differing views on the UPNS merger compared to Jim Vena's characterization of limited overlap, and to explain the paradox of minimal direct risk to CPKC's north-south flows versus concerns about the market power of a large UPNS entity.

Answer

President and CEO Keith Creel clarified that market power concerns stem from the sheer size and scale, and the potential for leveraging it on captive traffic, not just gateway traffic. He argued that minimizing overlap to a few plants is an 'ill-fated definition' of competition, emphasizing that reducing options does not enhance competition. Creel stressed the need for conditions with 'teeth' to prevent anti-competitive behavior, citing UP's past actions regarding South End rights post-CPKC merger as an example of concerns.

Tom Wadewitz asked about CPKC's differing views on the UPNS deal compared to Jim Vena's, the paradox of no direct risk to CPKC but concern over market power, and how market power could lead to anti-competitive behavior like bundling or taking captive traffic.

Answer

President and CEO Keith E. Creel emphasized concerns about 'sheer size and scale market power' potentially leading to price increases on captive traffic if gateways are not rewarded. He argued against a minimalistic definition of competition reduction and stressed the need for conditions with 'teeth' to prevent anti-competitive behavior, citing UP's past actions regarding South End rights traffic after CPKC's merger.

Tom Wadewitz of UBS Group questioned CPKC's strong opposition to the UP-NS merger, given the company's own favorable view on the benefits of single-line service, and asked why the proposed merger's single-line offerings are viewed as a threat.

Answer

CEO Keith Creel agreed that single-line service is the 'gold standard' but argued that the merger review is not an isolated analysis of that benefit. He stated that the UP-NS proposal does not threaten CPKC's own single-line intermodal services, which are strong in the Canada-U.S.-Mexico corridor. Creel emphasized the review must consider the broader, complex impacts of creating a potential duopoly in the North American rail network, which goes far beyond the benefits of one new service.

Tom Wadewitz from UBS asked about Old Dominion Freight Line's current terminal capacity, specifically if it exceeds the target 20-25% excess, and whether the company plans to reduce capital expenditures on terminals given the significant excess capacity.

Answer

Adam Satterfield, CFO, confirmed that Old Dominion Freight Line's excess terminal capacity is well over 30%, potentially above 35%, significantly exceeding their 20-25% target. He indicated that real estate capital expenditures are likely to be lower next year, with several completed service centers held in reserve and already depreciated, ensuring readiness for future growth.

Tom Wadewitz asked about Old Dominion Freight Line's current terminal capacity position, specifically if it exceeds the target 20%-25% excess, and whether the company plans to reduce CapEx spending on terminals given the high capacity.

Answer

Adam Satterfield, CFO, stated that the company is well north of 30%, possibly above 35%, in excess terminal capacity. He confirmed that CapEx for real estate is likely to be lower next year, noting that completed but unused service centers are already depreciating, reflecting the cost of maintaining capacity for future growth.

Tom Wadewitz of UBS Group AG inquired about the pricing outlook, specifically for revenue per hundredweight excluding fuel in Q3, and whether competitive discipline in the market is changing.

Answer

EVP & CFO Adam Satterfield stated he expects revenue per hundredweight ex-fuel to increase 4.0% to 4.5% in Q3, consistent with July trends. He emphasized this is not due to a change in pricing strategy but is a function of prior-year comparisons, and that ODFL continues to secure cost-based increases on renewals.

Tom Wadewitz of UBS Group inquired about the pricing environment, specifically the outlook for revenue per hundredweight excluding fuel in Q3 and whether competitive discipline is changing.

Answer

EVP & CFO Adam Satterfield projected that yield excluding fuel would increase by 4.0% to 4.5% in Q3, consistent with July trends. He emphasized that their disciplined, cost-based pricing strategy remains unchanged and that they continue to secure rate increases on renewals, seeing no degradation in the competitive environment.

Representing Tom Wadewitz, Mike Triano asked for a rule of thumb on how an increase in weight per shipment translates into higher revenue per shipment.

Answer

CFO Adam Satterfield explained that while there isn't a precise one-for-one rule, higher weight per shipment generally leads to increased revenue per shipment and significant operational efficiencies, particularly in linehaul. He noted that current weight per shipment is below levels seen in prior expansionary periods, indicating room for improvement.

Tom Wadewitz asked for an update on Small and Medium Business (SMB) performance, particularly how it compared to Q2 concerns following the global elimination of the de minimis exemption, and its specific impact on the international business. He also inquired about the stability of SMB trends moving forward.

Answer

Carol Tomé, CEO, reported that SMB volume was slightly down year-over-year but gained market share, noting that some SMBs face challenges from trade policy shifts. She highlighted a tenfold surge in daily dutiable customs entries post-de minimis elimination, largely managed by technology. Kate Gutmann, EVP and President International, explained efforts to assist consumer-to-consumer shippers. Brian Dykes, CFO, quantified the de minimis impact as $60 million in Q3, primarily due to shifts in profitable trade lanes like China-U.S. Carol Tomé added that while enterprise customers forecast a strong peak, SMBs are slightly behind last year, advising caution for next year due to anticipated tariff impacts.

Tom Wadewitz asked for an update on SMB performance, particularly regarding concerns from Q2 and the impact of the global de minimis exemption elimination on the international business, and whether SMB stability has been achieved.

Answer

Carol Tomé, CEO, reported that SMB volume was down slightly year-over-year but UPS gained market share. She highlighted extensive efforts to support SMBs through trade webinars and direct conversations, acknowledging the complexity of trade policy changes. The elimination of de minimis led to a tenfold surge in daily customs entries, managed efficiently by AI. Brian Dykes, CFO, quantified the direct impact of de minimis at $60 million in Q3 and an estimated $75-100 million in Q4, primarily due to demand shifts and changes in profitable trade lanes, particularly a 20% decline in China-U.S. volume. Carol Tomé noted that while enterprise customers expect a strong peak, SMB forecasts are slightly lower, advising caution for next year as tariffs fully impact SMBs.

Tom Wadewitz from UBS questioned the competitive responses in intermodal, particularly regarding J.B. Hunt and BNSF potentially shifting business to CSX, and the factors that make Norfolk Southern's intermodal business sticky, such as its network and corridor initiatives. He also asked about the competitive impact of CSX's Howard Street tunnel project.

Answer

President and CEO Mark George highlighted that over half of their J.B. Hunt business originates and terminates in the East, which they are confident in retaining due to excellent service. He emphasized Norfolk Southern's unrivaled intermodal franchise, built over two decades with significant investments in corridors and terminals, providing the fastest routes and optimal terminal footprint. Chief Commercial Officer Ed Elkins added that Norfolk Southern offers exceptional value in key lanes that cannot be replicated, attributing their position as the second-largest intermodal franchise to superior route and terminal networks.

Tom Wadewitz asked about competitive responses in intermodal, specifically from J.B. Hunt and BNSF potentially shifting business to CSX, and the stickiness of Norfolk Southern's intermodal business due to its network (e.g., Crescent Corridor). He also inquired about the competitive impact of CSX's Howard Street tunnel project.

Answer

President and CEO Mark George emphasized that over half of J.B. Hunt's business originates/terminates in the East, which Norfolk Southern is confident in retaining due to its unrivaled intermodal franchise, built over two decades with significant investments in corridors and terminals. Chief Commercial Officer Ed Elkins added that Norfolk Southern offers exceptional value in key lanes that cannot be replicated, and cargo owners will eventually return to the most sensible network. Mark George declined to comment on CSX's project.

Tom Wadewitz asked Kevin Boone for his outlook on market conditions, particularly weakness in chemicals, metals, and forest products, and whether carload can rebound in 2026 or if intermodal will be the primary growth driver.

Answer

Kevin Boone, EVP and Chief Commercial Officer, described mixed market conditions, strong momentum in aggregates/cement, and challenges from temporary closures in forest products and chemicals. He noted optimism for domestic coal due to regulatory shifts and data center demand, and continued focus on intermodal growth through partnerships and service.

Tom Wadewitz of UBS Group AG asked for Joe Hinrichs' view on the 'ease of doing business,' specifically questioning if a single-line rail service is inherently easier for shippers compared to an interline service, in the context of merger discussions.

Answer

President & CEO Joseph Hinrichs reiterated his focus on improving the customer experience to drive growth, without commenting directly on a transcontinental merger. He stated that CSX is open to all possibilities and partnerships that create shareholder value and make the industry more competitive.

Tom Wadewitz asked about Delta's 2026 outlook, specifically if the anticipated 10% earnings growth assumes low single-digit revenue growth in main cabin, or if it's primarily driven by premium and card. He also sought to understand the main drivers of main cabin improvement seen in Q4 and carrying into 2026, whether it's consumer segment strength or Delta's share gains and industry capacity rationalization.

Answer

President Glen Hauenstein confirmed that main cabin has inflected, and its improvement is part of Delta's base revenue assumptions for 2026, alongside continued growth in premium products and card spend. He attributed the main cabin improvement primarily to the rationalization of capacity at the low end of the industry, where competitors have removed seats and need to achieve higher fares to survive, which helps Delta's main cabin pricing.

Tom Wadewitz asked about Delta's 2026 outlook, specifically whether the projected 10% earnings growth assumes low single-digit revenue growth in the main cabin or if it's primarily driven by premium products and card spend. He also asked if the main cabin improvement is due to consumer segment strength or Delta's market share gains and industry capacity rationalization.

Answer

President Glen Hauenstein confirmed an inflection in main cabin demand, expecting current trends to carry into early 2026, with main cabin improvement as part of base revenue assumptions, alongside continued growth in premium products and card spend. He attributed the main cabin improvement to significant seat removals at the low end of the industry, which has forced competitors to raise fares, thereby helping Delta's main cabin pricing.

Tom Wadewitz sought clarification on the nature of the $150 million global trade headwind in Q1, specifically whether it was a revenue or cost impact, and why it is projected to worsen significantly to $1 billion for the full fiscal year.

Answer

EVP & Chief Customer Officer Brie Carere clarified that the majority of the $150 million Q1 headwind was a top-line revenue reduction, primarily due to de minimis impacts on the China lane. EVP & CFO John Dietrich added that the full-year $1 billion headwind includes $300 million in direct trade-related expenses, such as customs clearance and staffing, in addition to continued top-line pressure.

Tom Wadewitz asked for a better way to measure Network 2.0 progress, suggesting terminal closures as a key metric, and inquired about the program's status versus its original plan and the number of stations shut down to date.

Answer

EVP & CFO John Dietrich stated the program is 'on track,' with a primary focus on maintaining service levels. President & CEO Raj Subramaniam provided specifics, reporting that as of the end of fiscal 2025, 100 stations have been closed and 290 have been integrated, with a long-term goal to remove roughly 30% of surface facilities.

Tom Wadewitz asked for more tangible metrics to track the progress of Network 2.0, suggesting terminal closures as a key indicator. He inquired if the program was ahead of schedule and requested the number of stations shut down to date.

Answer

EVP & CFO John Dietrich stated the program is 'on track,' with a primary focus on maintaining service levels. President & CEO Raj Subramaniam provided specifics, stating that as of the end of fiscal 2025, 100 stations have been closed and 290 have been integrated, with a goal to remove roughly 30% of surface facilities by the program's end.

Tom Wadewitz of UBS inquired about the extent of cross-selling across Hub Group's service lines and asked if the creation of new 'watershed markets' from the potential rail merger represents a tangible opportunity for intermodal growth.

Answer

President & CEO Phillip Yeager confirmed that cross-selling is a key part of their strategy, stating that over 80% of customers use two services and over 60% use three, with recent success in Final Mile. He affirmed that the concept of new watershed markets is a significant opportunity, as eliminating interchange touchpoints could make previously unviable intermodal lanes both time-competitive and cost-effective, unlocking a large over-the-road conversion opportunity.

Tom Wadewitz of UBS Group asked for specific financial figures, including the gain on sale impact in truckload and a forecast for the 'other operating' line loss. He also posed a strategic question about potential disadvantages in the East-West intermodal network from rail consolidation.

Answer

CFO Darrell Campbell quantified the first-half gain on sale improvement at approximately $3 million year-over-year and advised modeling the 'other' segment loss for Q3 and Q4 to be consistent with Q2. Regarding the strategic question, EVP Jim Filter and CEO Mark Rourke reiterated that 'details matter' and they use a deliberate evaluation process for all rail services, declining to break out specific network exposures.

Tom Wadewitz of UBS asked about customer demand sentiment, specifically whether there are signs of optimism related to recent trade deals, tariff stability, or the newly passed tax bill.

Answer

Chief Commercial Officer Eddie Sorg described customer feedback as a 'mixed bag,' with continued softness and uncertainty around tariffs and investment. He noted the perspective on the tax bill is 'still a wait and see.' However, CFO Matt Beasley added that ArcBest itself sees potential for about $25 million in cash tax savings in the first half of the year from the bill and is encouraged by its potential to stimulate freight-generating activity.

Tom Wadewitz from UBS Group inquired about the level of rate increase needed to meaningfully improve margins amid cost inflation and asked if the current operating income level in the Logistics segment is a sustainable run rate.

Answer

CFO Chris Wikoff stated that a mid-single-digit rate improvement is needed, but emphasized that the path to double-digit TTS margins also depends on Dedicated growth, cost discipline, and technology leverage. Chairman & CEO Derek Leathers confirmed the improvement in Logistics is structural, driven by technology and the successful integration of Reed TMS, and expressed optimism for continued momentum, suggesting the performance is sustainable.

Tom Wadewitz from UBS asked about the remaining operational improvements in U.S. LTL, such as insourcing line haul from rail, and questioned why pricing, measured by revenue per hundredweight, remains under pressure despite service enhancements.

Answer

Alain Bedard, President, CEO & Chairman, explained that while next-day service is now comparable to peers, two-to-four-day service still needs improvement, which limits pricing power. He stated that until service is consistently on par with peers, rates cannot match them. He also noted line haul on rail is down to ~20% of miles, a significant reduction that has improved service on longer routes.

Tom Wadewitz of UBS asked for guidance on how to model revenue per hundredweight or revenue per shipment sequentially into Q3. He also questioned if Saia could achieve meaningful OR improvement without a broader freight market recovery.

Answer

EVP & CFO Matthew Batteh declined to give specific guidance on yield metrics, citing the significant impact of freight mix, but reiterated the company's intense focus on rational pricing. President & CEO Frederick Holzgrefe stated that while a freight recovery is the biggest lever, Saia has methodical, idiosyncratic opportunities to improve costs by building density in its new network. He believes this allows them to do a little better than normal seasonality even in a muted environment.

Tom Wadewitz from UBS Group asked about the significant year-over-year decline in load factor, its gap relative to peers, and whether this is a temporary trade-off for other initiatives or a metric that will influence future capacity decisions.

Answer

President & CEO Bob Jordan and COO Andrew Watterson acknowledged the load factor gap and stated that closing it is a key objective for the second half of the year. They explained the focus in H1 was on yield, but now shifts to volume. This will be driven by network changes adding 40% more intentional connection opportunities, the introduction of Basic Economy, and new distribution channels. Watterson noted that August load factor is already showing improvement, down only 0.5 points year-over-year.

Tom Wadewitz of UBS Group AG asked about the nature of feedback Union Pacific has received from shippers regarding potential industry consolidation since the topic became more prominent in public discussion.

Answer

CEO Jim Vena declined to provide specifics on shipper feedback, stating that the company does not negotiate or discuss details of ongoing discussions publicly. He reiterated that the company has been very specific in its official announcement and would not elaborate further while in advanced negotiations.

An associate for Tom Wadewitz of UBS asked if the mid-single-digit improvements in workforce and locomotive productivity are sustainable into next year, especially in a flat to slightly up volume environment.

Answer

Executive Vincenzo Vena expressed confidence in delivering on the company's 2025 guidance, stating there's no reason productivity improvements can't continue. CFO Jennifer Hamann reiterated this, noting that the company has clear action plans for productivity gains across all expense areas and capital, which gives them confidence in the runway ahead.

Tom Wadewitz asked if the recent executive change was related to strategy execution and whether the softening in intermodal was due to tariffs or broader macro demand.

Answer

CEO Tracy Robinson asserted that current headwinds are tariff and macro-related, not an issue with the company's strategy. She and Interim CCO Janet Drysdale confirmed the intermodal softness is tariff-related, driven by inventory front-loading ahead of deadlines and the impact of tariffs on goods from multiple Asian countries, not just China.

Tom Wadewitz from UBS Group AG inquired about United's strong Q2 cost performance, specifically the drivers behind the low CASM-ex and reduced distribution expenses, and asked for an update on the demand environment, questioning if it has returned to early-year levels.

Answer

EVP & CFO Mike Leskinen attributed the strong cost performance to operational reliability and expects similar results in H2 2025. He noted that while distribution costs are on a long-term downtrend due to direct channel growth, Q2 had some unique benefits. EVP & CCO Andrew Nocella added that while not fully back to January levels, demand saw a significant positive inflection in July, with a six-point swing in sales and a double-digit acceleration in business demand.

Tom Wadewitz from UBS asked whether the $100 million cost savings program targeted for 2026 should be viewed as a net benefit to EBIT or as a gross figure that will likely be offset by ongoing inflationary pressures.

Answer

Brad Delco, SVP of Finance, stated the savings should be noticeable to shareholders, pointing to Q2 results where operating expenses (excluding insurance and medical) were down despite volume growth. EVP & CFO John Kuhlow added that while inflation will persist, the company has high conviction in removing the identified $100 million in costs to improve the path to target margins.

Tom Wadewitz questioned why JetBlue appears to be underperforming peers despite the progress on its JetForward strategy, asking if the plan is causing slippage elsewhere. He also asked for the percentage of May and June that is currently booked.

Answer

President Martin St. George attributed the relative underperformance to JetBlue's underexposure to international and premium segments, which are currently driving demand, and noted the demand slowdown is heavier in its core Northeast markets. He emphasized that JetForward is the right long-term plan to address this and that they are moving quickly to adjust capacity to the current environment. He also stated that May is about 70% booked and June is just under 50% booked.

Tom Wadewitz of UBS asked about the market impact from fast-growing retailers like Shein and Temu, and questioned whether wallet share expansion with existing customers remains a significant growth driver compared to new logo wins.

Answer

CEO Malcolm Wilson stated that GXO has not seen a particular impact on its business from the growth of Shein and Temu. CFO Baris Oran confirmed that growing wallet share with existing customers remains a core driver, accounting for at least 50% of wins over a multiyear period. Wilson provided the Zalando partnership as a prime example, where a successful initial operation in 2021 led to the new, large-scale flagship facility in France, illustrating the "land and expand" strategy.