Yellow sees outsize volume drop as network overhaul advances

Massive tonnage declines continue to rack up for less-than-truckload carrier Yellow Corp. The company reported a 25% year-over-year (y/y) decline for November after the market closed Friday.

Yellow’s (NASDAQ: YELL) tonnage through the first two months of the fourth quarter was down 24% y/y, a drop that significantly outpaced the declines recorded by other asset-based carriers. Part of the volume falloff is tied to the company’s efforts to consolidate its different LTL brands on the same platform and rationalize its terminal network.

The company announced it sold a terminal during the quarter, booking a gain of $26 million. The proceeds will be used to reduce its debt load of $1.6 billion. Yellow maintains that the terminal reduction plan can occur “without sacrificing geographical service coverage or anticipated impact to customers.”

Compared to two years ago, Yellow’s tonnage is off more than 30% in October and November, while the two-year stacked comps of its peers were up modestly.

“In the near term, demand for LTL capacity continues to moderate and reflects what is taking place in the broader U.S. economy,” CEO Darren Hawkins stated in a news release.

With retailers still working through an inventory overhang and the industrial economy beginning to show signs of softness, LTL volumes have moderated from all-time highs established earlier in the year.

The Manufacturing Purchasing Managers’ Index turned negative in November for the first time since the beginning of the pandemic. The 49 reading was 1.2 points lower than October and ended 29 straight months of expansion — a reading of 50 or higher.

Approximately two-thirds of LTL carrier revenue is tied to the industrial complex.

However, the industry appears to be holding on to price. Yellow’s revenue per hundredweight, or yield, is up 22% y/y quarter to date. The metric includes higher fuel surcharge revenue. Retail diesel prices were up 43% on average in October and November compared with the same months a year ago. Excluding fuel, yields likely advanced at a healthy rate again.

“The LTL yield environment remains favorable and our Company’s long-term strategy remains on track as we work to complete the transformation to One Yellow,” Hawkins added.  

Yellow’s yields were up more than 40% on a two-year comp in October and November, outpacing competitors that saw mid-20% to mid-30% increases.

Metrics provided by Yellow imply the carrier’s revenue is off by low single digits through the first two months of the fourth quarter compared with the year-ago result.

“The network optimization is one of the final steps on our journey to One Yellow and the expected benefits include enhanced customer service, greater efficiencies, cost savings and additional network capacity,” Hawkins concluded.

Rejection rates drop below 4% as freight volumes decline

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Source: freightwaves - Yellow sees outsize volume drop as network overhaul advances
Editor: Todd Maiden