Forward Air Posts $673.9 Million as Trucking Capacity Tightens

By Marcus Bennett

Forward Air Corp. reported third-quarter operating revenue of $673.9 million, up 6.7% from $631.8 million, and swung to $9.12 million in net income as freight demand met tightening trucking capacity. For the three months ended Sept. 30, diluted earnings reached 34 cents a share, compared with a $23.8 million loss, or negative $7.06 a share, in the prior-year quarter. The Greeneville, Tennessee-based carrier released the results Nov. 9.

What does tighter capacity change for shippers?

Stewart said shippers in constrained markets focus on stability and consistency to secure capacity and reduce risk. Forward Air's answer is disciplined cost control and service reliability, according to him. That makes predictable capacity a commercial priority, although the company supplied no tender-rejection, rate or transit-time data.

For carriers and forwarders, the segment results show why capacity tightening does not mean uniform growth: expedited revenue rose 30.5%, intermodal rose 8.8%, while Omni Logistics revenue fell 8%. Forwarders face a planning problem when services move in different directions, and they cannot infer a universal freight-rate increase from Forward Air's accounts.

Forward Air's operating income rose to $45 million from $15 million a year earlier. But the company disclosed no truck count, loaded-equipment volume, rate index or capacity percentage, so its accounts do not separate price, volume, mix and cost effects.

How much of the capacity story is measurable?

Over the past year, the U.S. Department of Transportation has clamped down on legally questionable trucking capacity. Forward Air tied the current market to two forces: constrained commercial driver licenses and consistent freight demand. Its chief executive described the combination as an opportunity to improve profitability, not merely to add volume.

Stewart said commercial driver licenses remained constrained while freight demand stayed consistent:

“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.”

That claim remains management's assessment. Forward Air did not quantify available trucks, drivers, rate changes or the portion of revenue exposed to capacity-sensitive accounts. The company also placed no number on the transportation department's enforcement actions, leaving the scale of the tightening unmeasured.

Forward Air's industry account starts with the COVID-19 freight boom, which produced an oversupply of drivers and pushed capacity out of the market. The resulting imbalance became an unusually prolonged freight downcycle as supply and demand struggled to regain balance, the company said.

Which services produced the gain?

• Expedited freight: Revenue increased 30.5% to $337.4 million from $258.6 million. Operating income rose 7.5% to $36.5 million from $19.5 million.
• Omni Logistics: Revenue decreased 8% to $312.3 million from $339.6 million. Operating income nevertheless increased 25.2% to $12.2 million from $9.75 million.
• Intermodal: Revenue increased 8.8% to $63.5 million from $58.3 million. Operating income rose 26.4% to $5.19 million from $4.1 million.

Beyond those segments, Stewart said Forward Air delivered its highest quarterly revenue in two consecutive quarters and its best consolidated EBITDA result in nearly three years. He did not disclose the EBITDA amount.

Stewart characterized the improvement as broad-based and said the company had made progress on macroeconomic and industry conditions while retaining an opportunity to improve further. His plans called for maintaining momentum and growing the business. The claim needs one qualification: Omni's revenue contracted even as its operating income grew, so stronger earnings did not translate into growth in every revenue line.

Can the largest customer reduce volume risk?

After the quarter closed, Forward Air signed a definitive agreement with one of its largest customers to retain the account. An earlier announcement said the customer planned changes because of operational and supplier diversification, not service quality. The company did not name the customer or disclose how much revenue the account represents.

“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.

Stewart said the company had begun transitioning the affected services, a process expected to run from November through the following March. The two-year commitment protects only a significant portion of current services; it does not guarantee the customer's full former volume. Forward Air reduced the risk of an immediate account loss, but it must complete the service handoff without disrupting the tighter-capacity market it says supports profitability.

What scale does the company bring?

Forward ranks No. 37 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 1 among air/expedited carriers. Forward/Omni ranks No. 33 on the TT Top 100 list of the largest logistics companies. Those positions establish scale, not future rate power, because the company released neither a rate forecast nor a quantified capacity target.

Forward Air offered no rate outlook or capacity forecast, so its next proof point is whether operating income and the customer transition hold through March as commercial-driver constraints persist.