Businesses in Saia gradually overcoming initial challenges
Saia Inc. Forecasts Slight Operating Ratio Degradation for Q3 2025
Shares of Saia Inc., a less-than-truckload carrier, were up 5.6% at 2:46 p.m. EDT on Friday, outperforming the S&P 500. The company's optimistic outlook, despite anticipated challenges, has caught the attention of investors.
In a recent announcement, Saia forecasts a slight degradation in its operating ratio by approximately 100 basis points (1 percentage point) in the third quarter of 2025. This means the operating ratio is expected to worsen modestly compared to previous quarters. As of Q2 2025, Saia's operating ratio stood at 87.8%, up from 83.3% in Q2 2024, reflecting ongoing margin pressure.
One of the factors contributing to this margin pressure is the potential impact of a 2025 compensation increase. While exact figures are not detailed, the company experienced a 5% rise in labor costs in Q2 2025, which contributed to margin pressure and a higher operating ratio. If compensation increases continue or escalate in 2025, this would likely exacerbate operating cost pressures, potentially further degrading the operating ratio.
However, Saia’s management is focusing on network optimization and cost management to offset such pressures and improve operational efficiency despite labor cost challenges.
In Q2 2025, Saia reported a 1% decline in tonnage year over year, due to a 3% decline in shipments and a 4% increase in weight per shipment. Despite this, the company managed to report Q2 earnings per share of $2.67, 28 cents ahead of the consensus estimate and 81 cents better than Q1.
The company's Q2 revenue was $817 million, a less than 1% decline year over year but $9 million ahead of analysts' expectations. Saia's operating ratio recovered from its post-Covid-worst Q1/2025.
On the cost front, salaries, wages, and benefits expenses were 260 bps higher year over year as a percentage of revenue. Depreciation and amortization expense was up 130 bps year over year due to recent terminal investments. Cost per shipment was up 7.7% year over year, while revenue per shipment increased only 1.8%.
Saia's long-term operating ratio goal remains at sub-80%. The company has agreed to buy 31 terminals from defunct Yellow (OTC: YELLQ), expanding its national network to 213 terminals.
Looking ahead, Saia's third-quarter operating ratio guidance implies an 88.8%, a 370 bps increase year over year. This suggests that the company expects to face significant challenges in the coming quarter.
Revenue per hundredweight, or yield, was down 2% year over year in Q2, with the y/y increase in shipment weights being a drag on the yield metric. Saia had 21 more facilities in Q2 than a year ago, which added costs to the results.
In summary, Saia Inc. is anticipating a slight degradation in its operating ratio for Q3 2025, primarily due to potential labor cost increases. The company is focusing on cost management and network optimization to mitigate these challenges and improve operational efficiency.
Businesses in the less-than-truckload industry, such as Saia Inc., face varying challenges, including investments in technology and potential increases in compensation costs. In the third quarter of 2025, Saia forecasts a slight degradation in its operating ratio, which could further impact its financial performance if technology investments escalate labor costs, as projected increases may exacerbate operating cost pressures. Despite the projected degradation, Saia's focus on network optimization and cost management indicates its commitment to maintaining competitive efficiency in the technology-driven business environment.
