Weak Industrial Economy Hurts Old Dominion's Q4 Numbers; EPS Beats Estimates

Less-than-truckload (LTL) carrier Old Dominion Freight Line Inc. ODFL reported across-the-board declines in its fourth-quarter financial and operating metrics, although its diluted earnings per share of $1.80 came in a bit above analysts' consensus estimates of $1.78.

Thomasville, North Carolina-based Old Dominion also hiked its quarterly dividend to 23 cents per share, a 35.3% increase over the first quarter of 2019.

The weaker numbers were expected given the downturn in industrial production that has plagued the LTL industry's top line since the fourth quarter of 2018. Old Dominion executives highlighted the macro headwinds throughout most of 2019 and gave no indication as the year progressed that the near-term outlook would improve. Other LTL carriers have noted in their results and analyst calls that revenue and tonnage had picked up in January. Old Dominion did not reference 2020 activity in its statement issued early Thursday morning.

Greg C. Gantt, the company's president and CEO, said the industrial economy "remained sluggish" in the fourth quarter. Gantt noted that the company's shipment yields, measured by revenue for every 100 pounds hauled, held up well under the circumstances and that revenues began to stabilize.

Old Dominion has long been viewed as the best LTL operator and has emerged as a bellwether for the $42 billion sector and for industrial economic activity in general.

For the quarter, revenue came in at $1.009 billion, down from nearly $1.027 billion in the 2018 quarter, and the second consecutive quarter of year-over-year declines. Operating income dropped by more than $30 million to $188.2 million. Operating expenses rose across virtually every line item, especially in labor costs and in the "insurance and claims" category, where costs almost doubled year-over-year.

Volume fell 4.1%, while tonnage declined by 4.5 percent. However, revenue per shipment and per intercity mile both increased, albeit by low-single-digit amounts. Weight per shipment was virtually flat.

Operating ratio climbed 260 basis points to 81.3%, an unfavorable trend that the company attributed to significantly higher employee fringe benefit costs, notably a $17.1 million "phantom stock" charge arising partly from an increase in Old Dominion's share price during the quarter. Phantom stock is a pledge a bonus equal to either the value of company shares, or the increase in that value over a period of time.

For the year, revenue hit a record $4.109 billion, a 1.6% increase from 2018. Earnings per share also hit a record, rising 3.8% to $7.66. Operating income and net income rose slightly, while operating ratio rose by 30 basis points to 80.1%.

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