Old Dominion Freight Line increases monthly and quarterly expectations

Less-than-truckload (LTL) transportation services provider Old Dominion Freight Line (ODFL) had a better than originally expected February performance, saying this week that its LTL tons per day in February was up 11.7 percent annually, coming after a 10.1 percent annual gain in January.

Taking into account a strong month-to-date March performance, ODFL increased its first quarter growth expectations to between 11.0 percent-to-11.5 percent compared to previous estimates of 10.0 percent-to-11.0 percent, when compared to the first quarter of 2013. And ODFL also said its first quarter expectations for comparable growth in LTL revenue per hundredweight, excluding fuel surcharges, to be between 2.0 percent and 2.5 percent.

“Old Dominion has continued to produce double-digit growth in LTL tons per day in a period of weak economic growth and significant adverse weather conditions, primarily through ongoing gains in market share,” said David S. Congdon, President and Chief Executive Officer of Old Dominion, in a statement. “We believe the combination of substantial growth in tons with sustained yield improvement demonstrates the demand for our value proposition of superior service at a fair and equitable price.”

ODFL’s strong performance amid challenging market conditions does not come as a huge surprise, considering it has been cited by many industry experts as a strong example of a well-run and managed LTL operation in terms of how it manages its assets and networks, which is well-reflected with ODFL having one of the lowest, if not the lowest, operating ratio (OR) among all publicly-traded LTL carriers.

In early February, ODFL announced that fourth quarter 2013 revenue was up 11.0 percent annually to $592.5 million, with net income up 19.4 percent to $47.2 million, while its quarterly OR hit 87.0 percent, an annual improvement from 87.4 percent in the fourth quarter of 2012. For all of 2013, ODFL’s revenue was up 9.5 percent to $2.34 billion, with net income up 21.6 percent at $206.1 million, and its OR improved to 85.5 percent from 87.4 percent.

“While the trucking market has tightened up in 1Q14 due to the network disruptions for abnormally severe winter weather, we would not extrapolate Old Dominion’s tonnage growth or yield growth to the rest of the industry,” wrote Stifel Nicolaus analyst David Ross in a research note. “The company has consistently outgrown its peers in the aftermath of the 2009-2010 LTL price war and should continue to do so, in our view, as it is the most profitable carrier with a strategic direction aimed at significant volume growth. We believe the LTL sector should see average tonnage growth around 3% and yield growth in the 2% range in 1Q14. Volumes will vary significantly from carrier to carrier, while yields should be uniformly positive, in our view.”

Separately, ODFL reported this week that it has opened up a service center in New York State’s Hudson Valley in the town of Newburgh to meet growing demand in the region. ODFL said that this facility is comprised of 18 doors and has 27 employees and is in close proximity to Interstates 84, 87, and 287. This service area covers a wide range southern New York for shippers, including Goshen, Newburgh, Middletown, New Windsor, Beacon, Poughkeepsie, and Kingston, as well as Milford and Matamoras in eastern Pennsylvania.