Old Dominion Freight Line - Momentum

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Old Dominion Freight Line ( ODFL )

22 years before Dwight D. Eisenhower formed the national interstate system in the US, Old Dominion was moving freight around this country.   80 years after its humble beginnings, Old Dominion was recently named the number 1 LTL (less than truckload) carrier. 

Trucking is in integral part of interstate commerce here in the states and with almost 12,000 employees and roughly 6,000 tractors to pull their 16,000 pup trailers and 6,300+ vans, ODFL is a major player in the space.   They may not be the largest, but they were the fastest growing; sales rose 25.7 percent in 2011 to $1.7 billion according to a study by SJ Consulting Group in Pittsburgh. The LTL trucking sector as a whole grew 11.6 percent in 2011 compared to 2010, netting $30.6 billion in the year.

With higher gas prices and a challenging consumer environment, can these trends continue? 

Company Description & Developments
Old Dominion was founded in Virginia back in 1934 and is now headquartered in Thomasville, NC.  They serve over 48,000 direct points around N America with a presence is just about every state (47) and many in Canada, Mexico and the Caribbean. Through their OD Global division, they also offer worldwide LCL and container load services and logistics with service to Canada, Mexico, Alaska, Hawaii, the Caribbean, Europe, the Far East, Central America and  Oceana as well as worldwide LCL & FCL Ocean service.

According to the "Cass Freight Index Report" for February 2012, they noted a "possible reversal of a very long trend."  The report stated that "month‐to‐month change in freight movements in February was greater than that of expenditures. This is good news for the shipper, as costs to move goods seem to have flattened out for the time being. Compared to January, freight shipment volume was 2.5 percent higher in February, while freight spending was 1.2 percent higher. Annually, freight volumes were up 3.5 percent from January 2011."

The American Trucking Associations' For-Hire Truck Tonnage Index also rose 0.5% in February after a 4.6% decline in January.  If with the bearish blip in Jan, February's increase marks the sixth in the past seven months. The index is 5.5% higher than it was in the same month in 2011.

Financial Profile
ODFL is a small-cap (2.75 billion) company that is trading at about 17 times forward (expectations for next quarter) earnings.  ODFL has been a Zacks Rank 1 strong buy since March 6th.

Total sales increased 22% compared to the same period in 2010; earnings increased from $1.35 in FY2010 to $2.44 in FY2011.  They are expected to earn $2.80 for the full year (FY2012) according to the Zacks Consensus Estimate. 

Earnings Estimates
Of the 14 analysts who cover Old Dominion, the consensus is for the company to grow earnings by 14.84% in the current year (FY2012) and roughly 15.37% in FY2013.  The trucking company has exceeded analysts' expectations to the upside 4 quarters in a row; their average surprise was a positive 20.56% over the past year.   

In terms of the magnitude of analyst estimate trends, we are seeing all of the consensus estimates higher than they were 90 days ago for the current and next quarter as well as FY2012 and FY2013.  ODFL is expected to earn 52 cents when they report on April 26th.

Market Performance & Technicals
Like many of my recent momentum picks, Old Dominion's stock price has been in a clean, strong bullish channel since October of 2011.  In series of higher highs and higher lows, the shares have gained 85% from the low of $27 to its recent high of almost $50.

Shares till remain above the 50 and 200 day moving averages of $45.65 and $38.14 respectively.  Look for support at both of those levels and in between them at $43. Volume is also on the low side, which adds risk.  Average volume is roughly 390k shares traded daily.  

ODFL has outperformed the S&P 500's performance over the past year by more than 29%.  It outpaced it by over 9.7 in the past 3 months, but has become more correlated in the last month trailing the index by 0.5%.

If you are looking for a company with strong ties to the domestic consumer, ODFL may offer real economic clues during their earnings call at the end of the month. 

Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.

 


 
OLD DOMINION FL ( ODFL ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks

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