Forward Air's Freight Swap Pushing Shipment Yields Up

Forward Air announced Thursday that revenue per shipment accelerated further in November. The metric surged 61% year-over-year during the month in its expedited unit, which includes less-than-truckload, truckload, and final-mile services. That was ahead of the 52% growth rate logged in October.

The asset-light trucking provider is in the process of "cleansing" its customer book and onboarding heavier, higher-valued cargo. Forward FWRD is deepening its roots in sectors like industrial tech and medical equipment in favor of lighter, lower-margined e-commerce freight. The changes are designed to reduce the overall number of shipments in the network, creating more capacity at its terminals and driving yields per shipment higher.

The efforts drove weight per shipment 37% higher year-over-year in November, which followed a 33% increase in October. Tonnage per day, a combination of shipments and weight per shipment, was up only 6% in November (+16% in October). The metric had been increasing steadily since July but the culling of unfavorable loads likely provided some pressure. Total tonnage for the month was up nearly 11%.

"Our critical weight per shipment and revenue per shipment statistics for November were even stronger than in October, and total pounds for the month of November as compared to the same period increased 10.8%, a positive improvement from October," said Tom Schmitt, chairman, president and CEO.

The change in freight selection was driving the intended result at the end of the third quarter. Forward's LTL margin was 17.5% in September, up from less than 10% in recent periods and closer to the 20%-plus margins recorded in the mid-2000s.

Forward wants to compete in what it estimates is a $10 billion premium LTL freight market, wherein expedited services and precision execution are required. By comparison, all of the various class codes of LTL equal a freight market of more than $40 billion annually.

The company is currently selling its LTL service directly to small and midsize businesses in addition to its traditional customer base of forwarders and 3PLs. While the optics show Forward is competing directly against its incumbent customers when pricing freight, management contends this is still years away from actually occurring as it holds less than 10% of the premium LTL market.

Management was so confident in the strategy that it provided 2023 financial targets on its third-quarter call. Revenue is expected to increase 40% over the next two years with earnings per share moving 50% higher.

Yield, or revenue per hundredweight, was up more than 14% year-over-year in November, following an 11% increase in October. The growth rates for yields slightly lagged that of asset-based LTL carriers like ArcBest ARCB and Old Dominion ODFL. Those carriers booked yield gains of 16% or better for the first two months of the fourth quarter.

Forward's latest general rate increase (GRI) of 7.9% has been the highest announced by LTL providers thus far. However, it won't be implementing the annual rate increase, which is designed to capture general cost inflation on freight not hauled under contract, until February. Other carriers began running freight under the new GRIs in November.

"The solid growth is the result of sustained collaboration with our customers on the selection of higher-quality freight in our network and continued strong demand for our premium services," Schmitt continued. "We believe our solid November results illustrate the ongoing positive momentum in our business, and we remain optimistic about fourth-quarter results based on our performance through November."

Shares of FWRD were up 4.5% in midday trading Thursday compared to the S&P 500, which was off 0.2%.

Click for more FreightWaves articles by Todd Maiden.

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Watch: Carrier Update – December 9 2021

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