Key Points
- Earnings per share (EPS) of $1.48 beats analyst consensus estimates.
- Total revenue of $1.498 billion misses the estimate of $1.499 billion.
- Year-over-year revenue growth in Q2 hit 6.1%.
Old Dominion Freight Line (ODFL -0.50%), a top player in the less-than-truckload (LTL) freight industry, announced mixed results on Wednesday for the second quarter of 2024. Revenue saw solid 6.1% growth year over year but fell slightly short of analyst estimates. Earnings exceeded expectations with diluted earnings per share (EPS) hitting $1.48 against the anticipated $1.45. Overall, the quarter was stable, reflecting Old Dominion's ability to navigate economic headwinds.
| Metric | Q2 2024 | Analyst Estimate | Q2 2023 | Change (YOY) |
|---|---|---|---|---|
| Diluted EPS | $1.48 | $1.45 | $1.33 | 11.3% |
| Revenue | $1.498 billion | $1.499 billion | $1.413 billion | 6.1% |
| Operating income | $421.7 million | N/A | $391.6 million | 7.7% |
| Operating ratio | 71.9% | N/A | 72.3% | improved by 40 bps |
| Net income | $322 million | N/A | $292.4 million | 10.2% |
Source: Analyst estimates for the quarter provided by FactSet. YOY = Year over year.
Old Dominion Overview
Old Dominion Freight Line is a leader in less-than-truckload (LTL) transportation within North America. It provides regional, inter-regional, and national LTL services across the country through a single, union-free organization. Most of its revenue (98%) comes from LTL shipments. The company has been focusing on superior customer service and operational efficiency to maintain its market position and drive profitability.
Recently, the company has centered its efforts on expanding its network and infrastructure. This involves opening new service centers and updating its fleet. Technological investments are also a priority, aimed at optimizing operations and enhancing customer service.
Quarterly highlights
The primary driver of Old Dominion's revenue growth in Q2 was a 6.2% increase in LTL services revenue, which reached $1.49 billion. This suggests solid demand for the company's core services. Operating income also rose, climbing to $421.7 million, underscoring effective cost management and high revenue quality. Net income rose by 10.2% year over year to $322 million.
The operating ratio -- a measure of how much it costs to generate each dollar of revenue -- improved by 40 basis points to 71.9%, signaling enhanced operational efficiency. The smaller the ratio, the more efficient the company. Old Dominion's CEO, Marty Freeman, credited this profitability to operational efficiencies despite an uneven U.S. economy.
In its earnings release, the company highlighted capital expenditures totaling $238.1 million for Q2 and $357.6 million for the first half of the year. This investment spending was directed at service center expansions, fleet upgrades, and technological advancements. The company is on track for $750 million in total year capital expenditures.
Demand indicators showed positive trends. Old Dominion's LTL tonnage per day was up 1.9% year over year and per-day shipments were up 3.1%. However, a decline in average weight per shipment (down 1.2%) was noted. Other headwinds included a decrease in Other Services revenue (down 10.7% year over year), along with increased overhead expenses.
Operating cash flow was robust at $387.8 million for Q2 and $811.7 million for the first half of the year. Shareholder returns were significant, with $637.1 million used for share repurchases and $112.6 million paid in dividends.
Looking ahead
Management said it remains optimistic about continued strategic investments despite economic softness. It plans to continue focusing on long-term initiatives, encompassing service center expansions and technological enhancements. The company also has a goal to achieve a sub-70% annual operating ratio through continued revenue growth and operational improvements.
For investors, monitoring ancillary revenue and overhead expenses will be key areas of focus for the upcoming quarters. Investors should also pay attention to the company's ongoing commitment to capital expenditure and its resultant capabilities in maintaining service quality and operational efficiency.
