Expedited carrier Forward Air Corp. (NASDAQ: FWRD) reported a 6.2 percent gain in first quarter operating revenue across its portfolio, while operating income in the quarter was slowed by the dual effects of bad winter weather and higher operating costs.
Operating revenue for the quarter rose to $321.1 million, the company said after financial markets closed on April 24. Revenue for its expedited less-than-truckload (LTL) segment rose 5.1 percent to $178.6 million, though operating income declined by $1.2 million. Revenue for intermodal, its second-largest business, climbed more than 11 percent to $54.1 million. Operating income for the segment nearly doubled to just under $6.2 million.
Revenue for pool distribution, which provides fast-cycle handling and distribution of time-sensitive products within a specific geography, rose 5.9 percent, while operating income declined slightly. Revenue for the company's premium truckload business declined fractionally, although revenue per mile rose 6.4 percent year-over-year, and operating results swung to an $841,000 gain from a $43,000 loss in the year-earlier period.
All told, operating income rose 2.1 percent to $24.7 million in the first quarter of 2019. Net income climbed to $18.4 million from $17.1 million. Net income per diluted share came in at 64 cents per share from 60 cents per share in the first quarter of 2018. Operating cash flow rose slightly to $41.5 million, while earnings before interest, taxes, depreciation and amortization (EBITDA) was $35.6 million, compared to $34.9 million in the same period of 2018.
Overall, the results represented first quarter records for revenue, operating and net income, earnings per share, operating cash flow and EBITDA for the Greeneville, Tennessee-based company.
President and CEO Tom Schmitt attributed the top-line gains to strong revenue-management across the portfolio. Operating income was impacted by bad weather and higher self-insurance costs, Schmitt added. CFO Mike Morris said the earnings per share numbers came in at the high end of the company's guidance, propelled by favorable tax rates and solid intermodal results.
Seldon Clarke, an analyst for Deutsche Bank, was unimpressed, calling it an "in-line" quarter that "should have been much better." Clarke said the expedited LTL results were disappointing given 5% yield growth, a 2.4% increase in weight per shipment and some relief from purchased transportation costs, which were a bugaboo in the fourth quarter. Clarke said he thought those tailwinds should have resulted in better operating leverage and stronger earnings before interest and taxes. Clarke, whose firm has a "buy" recommendation on Forward Air shares, said he was confident the firm will do a better job of managing costs it can control, which do not include purchased transportation, in the coming quarters.
In the first quarter, the company's purchased transport costs rose to $144 million from $139.6 million in the first quarter of 2018.
Forward Air's primary niche is providing time-definite LTL services between U.S. airports; it moves goods between 90 terminals located at or around airports. It works with wholesale customers like airlines, steamship lines and third-party logistics providers that represent big shippers. Forward Air's high-velocity, time-definite model is designed to offer a less expensive yet timely and reliable alternative to air transportation. It typically operates over fairly long lengths-of-haul.
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