Dive Brief:

• Old Dominion Freight Line expects demand to pick up in Q2, as shippers’ bloated inventories dwindle and demand indicators show promising signs, President and CEO Greg Gantt said during a Q4 earnings call Wednesday. 
• The LTL carrier saw demand from industrial customers outperform that of retail in early 2022, but the two sectors’ demand trends converged by Q4. The rise in retail demand is coming from inventory needs and e-commerce growth, Gantt said.
• "We believe that the freight cycle will start turning, and we’ll start seeing some pickup,” said Gantt, who will retire in June. “Customer interactions and conversations ... support our belief that we're going to start seeing freight flowing again as we get into to March and into the second quarter."

Dive Insight:

The Thomasville, North Carolina-based carrier expects its usual volume increase in the spring as customers rebalance inventories, which have fallen, compared to the glut that sent some retailers into bankruptcy and threatened others in 2022.

Previous freight downturns have typically lasted 12 to 16 months, the president and CEO said.

“We think that's [how long] we've been ... in this one,” Gantt said. “So, yes, we're hopeful. Got our fingers crossed that we will come out of this thing as we get into the spring and later on in the second quarter.”

Old Dominion had a banner 2022 financially, boasting its second-straight year of $1 billion in revenue growth. But the carrier has faced the same headwinds as the rest of the trucking industry, including declining demand as budgets tightened in a difficult macroeconomic climate.

Although Q4 volumes fell 4.4% sequentially, a larger decrease than hoped, the carrier’s Q2 and Q3 2022 volumes were trending in the right direction relative to its 10-year average, CFO Adam Satterfield said during the call.

“Whether or not we get back to the full 10-year average, at least in the first half of the year, remains to be seen,” Satterfield said.

While retail customers remain about 25%-30% of Old Dominion’s business, demand from the sector has been growing faster than on the industrial side over the long term, Satterfield said. Industrial customers are about 55% to 60% of the company's business.

Gantt suggested retail customers could help offset potential weakening in industrial demand, “leading us out, and eventually we’ll start seeing the industrial picking back up again.”

TL giant Knight-Swift Transportation Holdings expects demand to strengthen later this year, too — the opposite of 2022, in which demand started off strong and slipped as the year progressed, CFO Adam Miller said during a Q4 earnings call.