Forward Air Earnings Call Insights: Strength in Yields, Volume Trends

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On Friday, Forward Air Corporation (NASDAQ:FWRD) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Strength in Yields

Scott Group – Wolfe Trahan: So, Rodney, I think you mentioned that linehaul yields are up around 4% over the past week or two and that’s more than we would have thought with the 3% GRI, so what’s driving that strength in the yields and do you think that’s sustainable and may be what have you assumed in the guidance for fourth quarter on the yield side?

Rodney L. Bell – SVP and CFO: He’s going on – Scott I think we’re a little slow to realize the full impact of the GRI. We initially thought it would come in about 2.8%, that’s probably the benefit. The rest of that, we started a program at the beginning of the month. We’re just being there on (indiscernible), so our people are being very cognizant when asked to discount shipments. That gives us some positive impact there and the rest of its mix. As far as sustainability, 4.4% is probably a bit high, but a number between 3% and 3.5% is probably good.

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Scott Group – Wolfe Trahan: Do we need to sustain that 3%, 3.5% rate to hit the numbers for the quarter or have you built in some cushion there? Just trying to understand what you guys have assumed for yields for the quarter.

Rodney L. Bell – SVP and CFO: 3% would be a good number.

Scott Group – Wolfe Trahan: So in terms of the Forward Air Complete, still really good growth year-over-year, but took a big step down sequentially and just trying to understand if this is seasonal or if this is just the economy or maybe if some of the (backs) business has started going away from you, what happened in terms of the sequential drop off at Complete and how are you guys thinking about that growth rate going forward?

Rodney L. Bell – SVP and CFO: Some of the (backs) business we’re seeing a little bit of that that we originally enjoyed in the second quarter, some of that is in fact — has in fact gone away, but growth rates going forward should be in the 20% to 25% range.

Scott Group – Wolfe Trahan: Do you have a sense on where that business is going or why it’s going away?

Bruce A. Campbell – Chairman, President and CEO: The typical reason for business like that going away is price.

Scott Group – Wolfe Trahan: In terms of the cash or $93 million of cash near record high what’s the plan for that cash, do you feel like there is finally an acquisition that could be coming or at what point do you think about doing some in terms of a buyback?

Rodney L. Bell – SVP and CFO: We’ve said this before the number one way for us to deploy cash is good acquisitions and the pipeline is pretty good right now. We’re looking at some interesting things and hopefully you’ll see us acting on that in the near term.

Scott Group – Wolfe Trahan: Then just a last couple of things. With the Forward Air Complete that growth rate starting to slow, should we start to think about the weight per shipment also then starting to flatten out it’s been down a bunch in the past few quarters, does that moderate now?

Rodney L. Bell – SVP and CFO: I’m sorry Scott that does in fact moderate.

Scott Group – Wolfe Trahan: Then the last thing, talk about maybe the relationship that you guys have with FedEx so they are doing a restructuring of their domestic express business are there any opportunities or benefits for you guys related to that as they cut some capacity or maybe as with the post office contract that they have could some of those volumes end up in your network. How do you think about that?

Rodney L. Bell – SVP and CFO: We think about that in these terms. We certainly hope it’s an opportunity. There is nothing concrete that we can tell you today.

Volume Trends

Alex – Morgan Stanley: This is Alex in for Bill today. I was curious as to what particular volume trends you might be seeing by end market or geography and the extent to which you might be seeing strength or weakness in one particular geographic area or end market that you’d like to comment on?

Bruce A. Campbell – Chairman, President and CEO: Probably the largest increase that we’ve seen and this is nothing to write home about, but if you look at our network in total the West Coast is doing really, really well. We have no other areas within the company that are extraordinary either good or bad.

Alex – Morgan Stanley: Are you able to sort of give a sense or the portion of maybe your potential strength in the West Coast coming from shippers and related to the ILA Strike and shippers sort of moving their shipments away towards the West Coast?

Bruce A. Campbell – Chairman, President and CEO: I think you could make that conclusion, but we don’t know that.

Alex – Morgan Stanley: With respect to the other operating expenses being a bit higher during the quarter, how should we think about that going forward or is there any sort of way we should particularly model that particular line item going forward?

Bruce A. Campbell – Chairman, President and CEO: About half to 60% of that is kind of it is what it is and that will continue but the rest of it was our items that we shouldn’t see again next quarter.

Alex – Morgan Stanley: And you are referring to the 2 million year-over-year increase half of that?

Bruce A. Campbell – Chairman, President and CEO: That’s correct.

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