Wall Street can be quite fickle, and Old Dominion Freight Line's (NASDAQ:ODFL) most recent earnings results are a case study of that fickleness. Even though the company delivered another quarter of double-digit revenue growth, improved margins, and produced record net income, shares have declined almost 10% since the report.

That seems like a bit of an overreaction, but maybe there is something else in these results. So let's go digging through the freight liner's most recent Q1 results to see if Wall Street is on to something or just continuing its "what have you done for me lately" mentality.

Old Dominion Freight Line's results: The raw numbers

Metric Q1 2018 Q4 2017 Q1 2017
Revenue $925.0 million $891.1 million $754.1 million
Operating income $149.3 million $143.4 million $108.1 million
Net income $109.3 million $197.2 million $65.7 million
Diluted EPS $1.33 $2.39 $0.80

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

One thing that is worth pointing out in the report is that the company benefited from a $105 million one-time gain in the prior quarter from the changes to U.S. tax law, so this quarter's results aren't a significant decline sequentially as the numbers suggest. Also, the reduction in income tax rates helped boost the bottom line compared to this quarter last year. 

What happened with Old Dominion Freight Line this quarter?

  • The company's revenue continues to grow by leaps and bounds as the company continues to deliver better revenue metrics. Total LTL (less than truckload) miles were up 15%, LTL revenue per mile driven was up 6.2%, and LTL weight per shipment was up 4.5%. It is rather astounding that its revenue efficiency metrics continue to improve considering how much Old Dominion Freight has been adding capacity lately, which suggests there is still a lot of room for the company to expand. 
  • On-time deliveries remained above 99% for the quarter and its cargo claims ratio (the amount it has to pay out for loss or damage of packages) was below 0.2%. 
  • Despite the increase in employees and capacity additions in recent quarters, the company's operating ratio (costs divided by revenue) declined to 83.9%, a 180 basis point improvement from this time last year. It is up compared to the prior quarter, though, so this may be something worth keeping tabs on in future quarters.
  • Management increased its guidance for capital spending in 2018 from $510 million to $555 million. It expects to invest heavily in new service center expansions and additional fleet capacity. Despite the higher levels of capital spending, it was able to add cash to the balance sheet, pay off $50 million in short-term debt, and buy back $17 million worth of shares in the quarter.
Long haul truck on road.

Image source: Getty Images.

What management had to say

During this past quarter, Old Dominion had a changing of the guard as CEO David Congdon moved into the executive chairman role and President Greg Gantt will take over the CEO position. Even though technically the transition isn't effective until May, Gantt assumed the role for this most recent earnings press release. Here's what he had to say about the LTL business' prospects for the rest of the year and the company's performance. 

The domestic economy continues to be strong, and we believe our ability to deliver superior service in this favorable operating environment will position us to win additional market share. The strength of our revenue growth contributed to a 180 basis-point improvement in our operating ratio for the quarter, and these factors, when combined with the substantial reduction in our income tax rate due to the Tax Cuts and Jobs Act, drove a 66.3% increase in earnings per diluted share.

ODFL Total Return Price Chart

Data source: ODFL Total Return Price data by YCharts.

Looking forward

Old Dominion Freight Line has been in the Congdon family for decades, and this will be the first time a member of the Congdon clan hasn't been in the CEO position since its founding in 1934. For some investors that give a lot of weight to founder and family led businesses, this could be a little concerning, but let's remember that the Congdons are still major shareholders in the business and remain as part of the board.

From a financial perspective, 2018 is looking to be another big year for the company. It continues to invest heavily in expanding capacity, yet revenue and cost efficiency metrics continue to improve. That's quite the accomplishment and bodes well for investors for the rest of the year. Even though Wall Street seemed less enthused with these results, it's hard to see anything that long-term investors wouldn't like in this report. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.