"It was the best of times, it was the worst of times." -- Charles Dickens, A Tale of Two Cities
That's how it is these days in the trucking business, where things are either going very well or very badly, depending upon whom you ask.
Old Dominion (NASDAQ:ODFL) is one of the trucking companies that is still enjoying excellent growth. Revenue in the first quarter rose 29.5% on a combination of more shipments, better yield per shipment, and fuel surcharges.
The company also boosted its operating ratio for the 14th straight quarter, as it dropped to 92.7% from 94% a year ago. With better profitability, Old Dominion's revenue growth translated into nearly 64% net income growth and just over 58% EPS growth.
Also on the upside, management noted good growth across all Old Dominion regions and, unlike many carriers, the company reported that shipping demand has remained strong in April. Exiting the quarter, Old Dominion had direct coverage in 41 states (full coverage in 31 states) and plans to open four or five more service centers during the year, including the first centers in Vermont and Maine.
While the operating ratio has improved for 14 straight quarters, even better performance could be ahead. With more service centers around the country, Old Dominion is increasingly attracting business from larger regional and national customers (and capturing more of their customers' total shipping business).
Expanding the number of service centers has been key to growing the business, but many centers are still not running at peak efficiency and are dragging down the company's overall operating ratio a bit. Thus, with high operating leverage at the service-center level, Old Dominion should be in position to continue to see disproportionate earnings growth, so long as revenue growth stays on track.
So, what to make of the industry as a whole? Given the spotty company-by-company performance, it's probably true that the trucking market has cooled off a bit. After all, when supply is tight enough, even the blind squirrels find nuts and do well. But when conditions start to return to normal, the weaker hands see business fall off.
But that said, I wouldn't go so far as to agree with those analysts who believe that the trucking sector as a whole is on the precipice of major decline. While I think a lot of excess demand has been absorbed, good carriers like Old Dominion continue to see strong outlooks for their business.
Granted, an economic decline across the country would mean that all bets would be off for even the best truckers, but so long as the economy grows, companies will need high-quality truckers like Old Dominion to get their goods to market.
Keep on truckin' with these other Foolish takes:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long, nor short the shares).
