What happened
Shares of Old Dominion Freight Line (ODFL -1.42%) followed a rough month of May with a strong 12.7% gain in June, according to data provided by S&P Global Market Intelligence, as some of the macroeconomic factors weighing on truckers earlier in the year showed signs of a rebound. Despite the volatility, Old Dominion investors are having a pretty good year so far in 2019.
So what
Shares of Old Dominion were under pressure in May due to fears about moderating demand for truckers, made worse by the uncertainty surrounding potential trade wars and a slowdown in the economy. Add in the negative ripple effect felt throughout the industry from Amazon.com reportedly exploring ways to expand into third-party shipping and logistics, and shares of Old Dominion and other truckers were bound to feel pressure.
Image source: Old Dominion Freight Lines.
Early in the month, Old Dominion reported that revenue per day for its less-than-truckload sector in May 2019 was actually up 4.2% compared to May 2018, easing fears of a slowdown. Later in the month, Bank of America Merrill Lynch upped its price target for the stock to $150 from $144 following a meeting with management.
The BofA analysts said that Old Dominion has seen a lack of pricing discipline in the markets in recent months but said it varied by market. Old Dominion management said it would not make pricing concessions to maintain market share, believing that the company's best-of-breed service reputation and approach to managing assets, along with industry dynamics, would give it a competitive advantage.
Now what
Old Dominion shares, despite a strong June, have not yet recovered what they lost in late April and May, but the shares are up 21% year to date, outpacing the S&P 500 by 3 percentage points. The company is showing itself to be a top performer in a difficult market.
What comes next remains to be seen. Old Dominion expressed some confidence in its future in May when its board approved a new $300 million stock repurchase program. There are some early hints of a pricing recovery in trucking and optimism that if the U.S. can resolve its trade differences with China, economic activity -- and demand for trucking service -- will accelerate.
A lot of factors outside of Old Dominion's control will determine how fast this stock will climb. But for long-term holders willing to ride out the rough road, Old Dominion is a top trucker with a history of delivering.
