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Old Dominion Freight Line Serves Up Another Quarter of Strong Earnings Growth

By Tyler Crowe - Oct 26, 2017 at 11:35AM

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Old Dominion Freight is using the rise of e-commerce to deliver fantastic quarterly results.

Old Dominion Freight Line's (ODFL 1.85%) quarterly earnings seem to keep trucking along at a great pace. The company posted another quarter of better-than-expected earnings results thanks to double-digit revenue growth and an eye on cost control. Here's a rundown of the company's earnings and why management thinks the best is yet to come. 

Semi-truck on highway at dusk.

Image source: Getty Images.

Old Dominion Freight Line's results: The raw numbers

Metric Q3 2017 Q2 2017 Q3 2016
Revenue $873.0 million $839.9 million $782.6 million
Operating income $163.9 million $160.4 million $137.4 million
Net income $102.3 million $98.4 million $85.6 million
Diluted EPS $1.24 $1.19 $1.03

Data source: Old Dominion Freight Line earnings release. EPS = earnings per share.

What happened with Old Dominion Freight Line this quarter?

  • Revenue was up 11.5% compared to the prior-year quarter thanks to an 8.6% increase in LTL (less than truckload) shipments and higher revenue per LTL hundredweight shipment. While the company's operating margin decreased slightly compared to the prior quarter, to 18.8%, it was still more 120 basis points better than this time last year.
  • Old Dominion Freight Line was also able to hold its on-time deliveries above 99% and its cargo claims ratio of 0.2%. If it can maintain these results through the fourth quarter, it will be a company record.
  • Management's total share repurchases for the quarter -- less than $1 million worth -- was considerably lower than the prior quarter. Management still has the authority to repurchase another $192 million in shares. 
  • Cash from operations picked up considerably this past quarter and now total $388 million. Unless the company experiences some significant issue in the fourth quarter, the company should bring in more than enough cash to cover its capital spending plans and its shareholder distributions. 

What management had to say

CEO David Congdon got to take another victory lap with another great quarterly result. As part of his press release, he explained some of the market factors that he thinks will give the company a long growth runway: 

The strengthening economy supported our third quarter revenue growth, but we also believe that tightening industry capacity and pricing increases accelerated the pace of our revenue growth for September. Due to the upward trend in the industry pricing environment, our ability to deliver superior service at a fair price has become a critical competitive differentiator in the LTL industry. In addition, the consistent investments in our service center network and equipment provide us with the necessary capacity to win additional market share.

Looking forward

Old Dominion has outperformed Wall Street's expectations every quarter thus far in 2017. Based on Congdon's statement, there seems to be reason to believe that the company could continue to produce better results next quarter and into 2018. The company has only $17 million in net debt and a business generating enough cash that it doesn't need external funding to grow the business.

Old Dominion Freight is in a cyclical business that is going to ebb and flow with the broader economy, but the rise in e-commerce is likely going to give the company plenty of business opportunities in the future.

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Stocks Mentioned

Old Dominion Freight Line, Inc. Stock Quote
Old Dominion Freight Line, Inc.
ODFL
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