Another Day, Another Record-Breaking Earnings Report — This Time At Saia

SAIA's record-breaking quarter, the latest in a string of blowout financial reports by LTL companies, drew rapid applause from Wall Street. 

At approximately 12:45 p.m Thursday, the stock of Saia SAIA was up 8.36% to $221.82. That was the high level of the day, with Saia stock having climbed immediately after its early morning earnings announcement that reported an operating ratio of 85.5% and total shipments at an all-time high.

The OR for the company marked a 600-basis-point improvement over last year's second quarter. It was surrounded by an entire list of data that was all positive: operating income up 132.4%, LTL revenue per hundredweight — the all-important yield figure — up 10.5%, and revenue per shipment up 17.9%.

The bottom-line performance of GAAP earnings per share of $2.34 beats consensus by 28 cents per share, according to SeekingAlpha. Revenue was up 36.6% year on year and beat consensus by $14.72 million. The record revenue figure of $571.3 million was up 36.6% from a year ago.

The OR was significantly better not just year on year but sequentially as well, improving by 440 bps. Saia, in its earnings statement, noted that it had estimated that the improvement would be just 270 bps. 

The transportation analysis team led by Amit Mehrotra at Deutsche Bank also took apart the cost data in Saia's earnings report and liked what it saw. It concluded that the difference between the revenue and the cost of shipping was 1,000 bps, "as SAIA clearly took advantage — seemingly more than anyone else in the industry — of a strong pricing backdrop," Deutsche said in a research note published after the release of the earnings.

Saia saw its yield — revenue per hundredweight — rise 10.5% when fuel is included, to $19.84 from $17.95, and 5.7% when fuel is excluded. That sort of gain led Deutsche to write that "through technology investments and mgmt. initiatives, SAIA clearly is gaining a better sense of its costs at a shipment-by-shipment level, with the current strong pricing backdrop allowing the company to accelerate its margin trajectory by about 2 years, by our estimates."

That Saia attempted to be more aggressive on the pricing side of the commercial equation was made clear during the company's call with analysts. On that call, CEO Frederick Holzgrefe made clear that the company believed it provided a unique service and was going to seek to have its customers pay for it. 

"We're providing a range of services to the customers," Holzgrefe said. He specified "limited access deliveries" and hazmat transportation. "All these things add costs," he said on the call. "And if we do that we feel strongly we need to be reimbursed for them."

If the company's sales team is engaged with its customers, Holzgrefe said, "they can accept they're getting something for it."

Other developments from Saia discussed on the earnings call or in its earnings statement:

— On the call, one analyst noted that Saia was getting "longer and heavier," a reference to the fact that its length of haul was up 4% from a year ago, while its weight per shipment rose 7%. Holzgrefe said those sorts of increases would be expected as the company gains more of a "national footprint." "I think we can support those statistics," he said of the increases in length of haul and weight. Continued use of analytics will help Saia "focus in on what freight operates best in the network, and those could be different in different parts of the country," he said. "But over time, we think those numbers will firm up as we build up that national network."

— Douglas Col, Saia's CFO, and Holzgrefe both said the company's expansion plans are to add 10 to 15 service centers a year, a number that drew some skepticism from analysts on the call. But Holzgrefe noted that the company's northeast expansion where it added approximately 25 terminals means that "we have a lot of experience" on how to optimize the addition of new facilities. He said it is "very workable next year" but that by three years out, the growth pace might slow.

— Col said on the call that he wasn't seeing the usual LTL slowdown from the second quarter to the third this year. Shipments are running at about the same level where they left off at the end of June, Col said.  He made the remark in response to a question of whether Saia can hold its strong OR of 85.5% going forward, given the normal seasonal slippage. Col said given the gains the company has made in pricing and network efficiencies, "our expectation is to try to hold it flat between the second and third quarter."

— Salaries, wages, and benefits rose at Saia, like they did almost everywhere this quarter, jumping to $268.8 million from $224.3 million. More notably, purchased transportation more than doubled, to $62.4 million from $26.4 million. Col said that number, even against a higher revenue figure, is more than the company targets to spend. While the company would like to see it return more to normal, "there is no indication it will come in the next quarter or two."

— Another area of improvement at Saia: its debt position. Total debt at the end of the quarter was $61 million, and net debt to total capital — which brings in the cash position of the company — was 0.8%. A year ago, debt was $160.8 million and the debt to total capital was 13.1%. 

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