Why Is Old Dominion (ODFL) Down 8.9% Since Last Earnings Report?

A month has gone by since the last earnings report for Old Dominion Freight Line (ODFL). Shares have lost about 8.9% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Old Dominion due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Earnings Beat at Old Dominion in Q4

Old Dominion Freight Line’s earnings per share of $1.80 beat the Zacks Consensus Estimate by 2 cents. However, the bottom line declined 7.7% year over mainly due to higher operating expenses.

Revenues came in at $1,009.2 million, edging past the Zacks Consensus Estimate of $1,002.1 million. However, the top line fell 1.7% on a year-over-year basis mainly due to a decline in LTL (Less-Than-Truckload) tonnage as a result of a soft freight environment.

However, the company announced a 35.3% hike in quarterly dividend to 23 cents per share (annualized 92 cents). The first installment of the new dividend will be paid on March 18, to shareholders of record as of Mar 4, 2020.

Other Details

In the quarter under review, Old Dominion reported a 4.5% decline in LTL tonnage. The major revenue generating segment — LTL services — logged a total of $996.6 million, down 1.4% year over year.

However, LTL revenue per hundredweight was up 2.7% in the final quarter of 2019. The metric increased 4%, excluding fuel surcharges. However, LTL shipments declined 4.1%. Also, LTL weight per shipment fell marginally. Total operating expenses increased 1.6% to $820.9 million. Operating expenses increased mainly due to a 3.6% rise in costs on salaries, wages & benefits.

With expenses increasing and revenues decreasing, another key metric — operating ratio (operating expenses as a percentage of revenues) —deteriorated to 81.3% in the fourth quarter of 2019 from 78.7% in the year-ago quarter. Notably, lower the value the better.

Old Dominion exited the 2019 with cash and cash equivalents of $403.57 million compared with $190.28 million at the end of 2018. Capital expenditures at the end of the fourth quarter was $109 million. During the final quarter of 2019, Old Dominion rewarded its shareholders to the tune of $49.2 million.

During 2019, the company incurred capital expenditures to the tune of $479.3 million. Old Dominion expects capital expenditures of $315 million in 2020. Of the total amount, $245 million is anticipated to be invested in real estate and service-center expansion. The company expects to spend $20 million and $50 million toward tractors and trailers and technology and other assets, respectively. During the final quarter of 2019, Old Dominion rewarded its shareholders to the tune of $49.2 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Old Dominion has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Old Dominion has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.