Experts are saying that the LTL (Less Than Truckload) industry is currently experiencing weak demand. This is despite a potential bottoming out of inventory destocking around mid-year. The recent closure of Yellow Freight in August has provided some relief. However, market share distribution among carriers has been uneven, with those having similar pricing and footprints benefiting the most.
They believe that although capacity remains in check and pricing should favor carriers in the coming year, the fundamental demand in the industry is soft. Therefore, experts are focusing on companies with opportunities for self-improvement and those with deep valuation discounts.
While core freight demand remains sluggish, experts expect pricing and yields to improve over the next 12 months. They will be benefiting from negotiated contracts and higher fuel surcharges. They note that terminal capacity remains constrained due to real estate inflation, and the integration of Yellow’s assets into the market will take time.
Experts conclude that despite the potential for demand to weaken further, factors unique to the LTL industry, such as the absorption of Yellow Freight’s volumes and the growth of e-commerce and manufacturing nearshoring, should provide some stability. In a soft demand environment, the industry expects to maintain pricing power through rationality and consolidation. Overall, the LTL industry is seen as a favorable long-term investment, with opportunities in self-help stories and undervalued companies. However, there are some potential downside risks in the short term due to volume churn and margin pressures.