Old Dominion Posts Record Quarterly Revenue, EPS And Operating Ratio Despite Weak Macro Conditions

Less-than-truckload (LTL) carrier Old Dominion Freight Line, Inc. ODFL on Thursday posted record quarterly revenue, earnings per share and operating ratio in its second quarter despite year-on-year declines in tonnage, volume and average shipment weight, as its renowned yield management capabilities offset the impact of weaker industry demand.

Thomasville, North Carolina-based Old Dominion reported earnings per diluted share of $2.16, an 8.5 percent increase over year-earlier figures, and $0.05 per share above median estimates of analysts polled by Barchart. Revenue rose 2.6 percent to nearly $1.07 billion. Operating income increased 6.4 percent to $234.5 million, while net income increased 6.5 percent to $174 million.

Operating ratio, the ratio of revenues to expenses and a key measure of a carrier's efficiency, dropped to 77.9 percent from 78.7 percent in the 2018 quarter. Effectively, Old Dominion spent 77.9 cents for every $1 in revenue in the quarter.

The revenue gains came from a 9.5 percent increase in revenue for every 100 pounds hauled, known in industry lingo as revenue per hundredweight, and a determinant of the company's profitability. The higher yields overcame a 6.3 percent year-over-year decline in tonnage, a 2.6 percent drop in shipments and a 3.8 percent drop in weight per shipment. The decline in shipment weight was expected, the company said, adding that it expects shipment weight to trend higher during the second half of 2019.

Old Dominion generated $255.7 million in net cash from operations during the quarter. Capital spending totaled $159 million. The company said its full-year capital expenditures will total $480 million, with $220 million earmarked for real estate and service center expansion, $165 million for tractors and trailers, and $95 million for information technology and ancillary projects.

Old Dominion is considered by many to be the best-managed LTL carrier and perhaps the best-run in all of trucking. It is especially known for its yield-management prowess and for a deep understanding of the dynamics between costs and pricing. It has a long-held reputation for never underpricing its services. 

As LTL carriers were furiously cutting rates during 2009 and 2010 to gain and defend market share in the wake of the Great Recession and to drive the hobbled YRC Worldwide, Inc. YRCW out of business, Old Dominion refused to go along. As a result, Old Dominion did not have to dig itself out of the rate hole like other carriers when the industrial economy and the LTL sector that supports it rebounded in 2011.

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