Forward Air bolsters freight demand amid capacity crackdown

Forward Air has benefited from constrained capacity and consistent demand, according to CEO Shawn Stewart. (Forward Air via Facebook)

Forward Air Corp. reported top-line growth for the third quarter Nov. 9 as freight demand bolstered ongoing capacity reductions.

The Department of Transportation has clamped down on legally questionable trucking capacity throughout the past year. The industry already had seen capacity leave since the freight boom brought on by COVID led to an oversupply of drivers. This started what would become an unusually prolonged freight downcycle as supply and demand struggled to regain balance.

“Regarding the broader logistics space, capacity in the trucking industry has been tightening as the number of [commercial driver licenses] continue to be constrained,” Forward Air CEO Shawn Stewart said during an investor call. “Combine that constraint with consistent demand, and that puts us in a very good place to continue improving profitability as we have each quarter this year.”

The Greeneville, Tenn.-based company posted net income of $9.12 million, or 34 cents a diluted share, for the three months ending Sept. 30. That compared with a loss of $23.8 million, or negative $7.06, during the same time the previous year. Consolidated operating revenue increased 6.7% to $673.9 million from $631.8 million.

“In constrained environments such as this, shippers typically focus on stability and consistency to ensure capacity and to mitigate risk,” Stewart said. “We are well-positioned to grow in this market environment through disciplined cost management and exceptional customer service.”

Stewart noted that the company has reported the best quarterly revenue in its history for the past two consecutive quarters. He also said operating income improved to $45 million from $15 million a year ago and that consolidated earnings before interest, taxes, depreciation and amortization reached its best results in nearly three years.

“Overall, I believe our team has the company moving in the right direction,” Stewart said. “We have made a tremendous amount of progress in the current market condition, both on a macro- and industry-specific basis. However, I believe we have an opportunity to continue improving. We plan to maintain the momentum and grow the business.”

Stewart added that the improvements were not localized to a particular segment but were strong across the board.

Revenue results by segment

• Expedited freight: Increased 30.5% to $337.4 million from $258.6 million. Operating income increased 7.5% to $36.5 million from $19.5 million.

• Omni Logistics: Decreased 8% to $312.3 million from $339.6 million. Operating income increased 25.2% to $12.2 million from $9.75 million.

• Intermodal: Increased 8.8% to $63.5 million from $58.3 million. Operating income increased 26.4% to $5.19 million from $4.1 million.

Forward Air announced after the quarter closed that it had entered into a definitive agreement with one of its largest customers to retain business. The earlier announcement clarified that the change was the result of operational and supplier diversification initiatives by the customer, and not an issue with service quality. Stewart provided an update during the investor call.

“Under the new agreement, the customer has agreed to continue utilizing the company for a significant portion of the services currently provided to them for a period of two years,” Stewart said. “Of the services to be transitioned, we have already started that work, which is expected to occur starting this month through March of next year.”

Forward ranks No. 37 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 1 on the air/expedited carriers sector list. Forward/Omni ranks No. 33 on the TT Top 100 list of the largest logistics companies.