Another quarter, another million tons hauled. And another 30%-plus growth in EPS.
In other words, new quarter, same story at Old Dominion Freight Line
For the seventh quarter in a row, this less-than-truckload carrier delivered better than 20% revenue growth for its investors -- 27% in this case. Growth was very much a product of volume, as a 7% increase in weight per shipment and a 13% increase in the number of shipments fueled the increase. Pricing was basically stable; revenue per hundredweight was actually down slightly when adjusting out the fuel surcharge.
Building on that revenue performance, Old Dominion delivered its 17th straight quarter of improvement in the operating ratio (a basic measure of operating profitability). The number fell to 90.8% in this quarter vs. 91.4% a year ago, though this fourth-quarter's result is weaker than that of the second and the third quarters. Still, when you see wages up 28% and operating supply expense (meaning mostly fuel) up 49%, that performance is fine all the same.
Listening to management's commentary, it seems like little is going to change in 2006. Old Dominion expects modest (low single digits) growth in yields and will continue to spend money on new service centers and tractors as part of its expansion plan.
It's all this expansion that makes valuation a little tricky. You can't run a straight cash flow valuation here because capital expenditures are exceeding operating cash flow. That won't continue forever. Eventually the company will reach something approaching a steady state, but it means that investors have to play a bit with the numbers to try to ascertain a fair value.
Although Old Dominion does seem a bit more expensive than the average trucking company, and its return on invested capital is below the likes of larger rivals J.B. Hunt
Drive on with more Foolish thoughts on trucking:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
