Less-than-truckload carrier Yellow Corp. (NASDAQ: YELL) reported large year-over-year improvements in its operating metrics through the first two months of the second quarter Monday. However, the increases lagged those of some competitors.

Table: Company reports

Of the publicly traded LTL carriers that provide intraquarter updates, all have posted big year-over-year increases due to significant demand erosion tied to COVID lockdowns in the year-ago period.

Overland Park, Kansas-based Yellow reported a 23.7% year-over-year increase in tonnage during April but only an 8.9% increase in May. By comparison, May tonnage for the other carriers providing updates increased in excess of 20%.

The carrier did see yield improvement accelerate in May. Revenue per hundredweight, including fuel surcharges, increased 18.4% year-over-year during the month, following an 11.8% increase in April. Other carriers reported midteen percentage increases on average during the same two months.

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The combination of trends led to implied revenue growth of approximately 36% and 27% year-over-year for the first two months of the second quarter, respectively, again trailing that of its peers.

The LTL industry has become a bit of a freight catchall during COVID. Carriers are continuing to see an influx of freight from not only traditional manufacturing-based customers but also from shippers wanting e-commerce-related and business-to-consumer freight moved as the truckload market remains historically capacity-constrained.

Manufacturing data ticks higher in May

The Manufacturing Purchasing Managers’ Index increased 50 basis points sequentially to 61.2% in May, the fourth consecutive reading above 60%. A reading above 50% implies growth in U.S. manufacturing.

Some of the index’s components — new orders (67%), production (58.5%) and supplier deliveries (78.8%) — showed continued strength. While manufacturing inventories (50.8%) crossed into growth territory, customers’ inventories (28%) remained “too low,” suggesting a prolonged period of inventory restocking is still required.

LTL shipments traditionally have a high correlation to the PMI data, lagging fluctuations in the index by three months. Freight related to manufactured goods can account for roughly 80% of LTL shipments for some carriers.

Analysts react positively to Q2 trends

Overall, the year-over-year growth rates decelerated in May, but there is significant noise in the comps to a year ago. Analysts were pleased with the updates on LTL conditions.

Deutsche Bank (NYSE: DB) analyst Amit Mehrotra noted Friday the intraquarter updates were “still extremely impressive” and “well above expectations.”

Following the reports, Cowen analyst Jason Seidl modestly raised earnings estimates for the LTL carriers he follows. “Q2 is shaping up to be another strong quarter. Sequential trends in May appear to have softened slightly, off of a monster April, and ~inline with historical trends,” he told clients in a Thursday note.

The current trends, while important for Yellow, are not the company’s only focus.

The carrier is currently executing an overhaul aimed at consolidating all of its LTL brands and logistics company under one roof and on the same technology platform. The company is also using a highly controversial $700 million CARES Act loan to replace tractors and trailers, which it expects will greatly improve its cost structure and fleet performance.

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