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Earnings call: Forward Air Outlines Growth Strategy Amid Freight Recession

Published Nov 01, 2023 12:48
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Forward Air (NASDAQ:FWRD) Corporation's (NASDAQ:FWRD) CEO, Tom Schmitt, discussed the company's performance and future plans during the Third Quarter 2023 Earnings Release Conference Call. Amid a challenging freight recession, Schmitt highlighted the company's focus on the less-than-truckload (LTL) business, including a potential acquisition of Omni, and the strategic shift towards direct sales. The company also plans to invest in technology for safety and operational efficiency, and a general rate increase is expected in February 2024.

Key takeaways from the call:

  • Forward Air's LTL business showed positive volume trends in August and September, with further improvements in October.
  • The company's "grow-forward" program focuses on LTL, high-value freight, industry-leading service, and a larger customer base.
  • The pending acquisition of Omni aims to target the $15 billion high-value freight LTL market.
  • Starting in Q1 2024, LTL will be a separate reporting segment with clear targets and action plans for increased revenue and margin.
  • The company is finalizing plans to accelerate terminal expansion to support the direct-to-shipper strategy.
  • A general rate increase is expected to be announced in November for implementation in February 2024, with an expected increase between 5.9% and 7.9%.

Schmitt also discussed the company's plans to organically grow its LTL focus through core domestic forwarders, direct sales to customers, and achieving corporate clarity. Despite the pending acquisition of Omni, the company does not feel obligated to complete the transaction, with termination being an option.

In terms of guidance, Forward Air expects a muted peak in Q4 and emphasized the need to find the volume pricing sweet spot for the door-to-door and direct business. The company also plans to maintain service levels, control costs, and invest in technology and operations.

Schmitt noted increased engagement from domestic forwarders due to temporary dislocations in the market and improved demand for high-value LTL freight. The company aims to preserve these relationships while expanding its direct sales network.

The CEO also addressed legal issues, emphasizing the importance of doing things the right way and providing updates on shareholder appeals. He expressed confidence in the company's leadership and strategy and clarified the approach to targeting customers that do not use forwarders.

Looking ahead, Forward Air aims to achieve a mid-80s operating ratio in the LTL segment and sees potential for higher margins in the door-to-door business. The company's priority for deploying capital is organic growth, including network expansion, followed by smaller tuck-in M&A opportunities in the LTL space. The call concluded with information about accessing the webcast on Forward Air's website.

InvestingPro Insights

In light of the recent developments at Forward Air Corporation, some key InvestingPro Tips and real-time data can provide valuable insights.

InvestingPro Tips reveal that management has been aggressively buying back shares and yields a high return on invested capital. This, coupled with the fact that the company has maintained dividend payments for 19 consecutive years, suggests a strong financial footing. However, the stock has taken a significant hit over the last six months, trading near its 52-week low.

InvestingPro Data shows a market capitalization of $1650M, with a P/E ratio of 15.89 as of Q3 2023. The company's revenue for the last twelve months up to Q3 2023 was $1723.89M, with a negative growth of -11.69%. The company's return on assets for the same period stood at 9.13%, and the dividend yield was 1.49%.

These insights should be considered when assessing Forward Air Corporation's growth strategy and future plans. For further tips and data, consider exploring the InvestingPro platform, which offers a wealth of additional insights.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Earnings call: Forward Air Outlines Growth Strategy Amid Freight Recession

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