Old Dominion Freight Line

Introduction

• Company Name: Old Dominion Freight Line
• Ticker: ODFL
• Sector: Industrials
• Industry: Ground Transportation
• Market Capitalization: Mega $47.7 billion

Overview

Old Dominion Freight Line, Inc. stands as a prominent North American less-than-truckload (LTL) motor carrier, offering regional, inter-regional, and national LTL services through a unified, union-free structure. The company’s diverse service portfolio includes expedited transportation facilitated by a network of service centers spread across the continental United States. Additional value-added services such as container drayage, truckload brokerage, and supply chain consulting augment its comprehensive offerings. Operating approximately 255 service centers, of which 231 are owned and 24 leased, Old Dominion’s system ensures efficient freight pickup and delivery within local service areas. Notably, its customer-centric approach includes providing access to critical information like freight tracking, shipping documents, rate quotes, rate databases, and account activity.

OD Global extends established services and pricing to destinations within North America, covering Canada, Mexico, Alaska, Hawaii, Puerto Rico, and the Virgin Islands.

In this article, we delve into an in-depth analysis of Old Dominion Freight Line (ODFL), examining its potential as a thematic investment, its viability for dividend-focused investors, and its suitability for a Buy & Hold active investment strategy.

Rating and Competitors

Old Dominion Freight Line receives an impressive rating of 116%, surpassing the Eyestock benchmark of 100%. This robust rating positions ODFL as an attractive choice for Buy & Hold active investors. Competitors in the industry include SAIA (103%), LSTR (85%), SNDR (83%), JBHT (68%), WERN (53%), UHAL (44%), and KNX (47%).

Financial Performance

As of Q3 2023:

• Revenue: $1.5 billion
• Net Income: $0.34 billion
• Gross Margin: 87% (demonstrating economies of scale)
• Net Profit Margin: 21% (indicating a competitive advantage)
• CFO/NI: 120% (reflecting high-quality earnings)

Financial Position

Old Dominion Freight Line exhibits a robust financial position with rising assets ($5.29 billion) accompanied by rising equity ($4.06 billion). The company maintains a modest debt of $0.08 billion, resulting in a favorable coverage ratio (CFO/Debt) of 16.598, ensuring solid long-term solvency. Key metrics such as Debt/Equity (0.024) and Current Ratio (1.632) further highlight its solid solvency, both in the long term and short term.

Efficiency Analysis

Efficiency metrics showcase Old Dominion Freight Line’s effectiveness in utilizing its resources:

• ROE (Return on Equity): 33% (excellent)
• ROIC (Return on Invested Capital): 27% (good)

Sustainability Analysis

While the net income growth rate is negative at -8%, indicating a maturing phase, the average growth rate of profits over 2 years is -2%, and over 5 years is 25%, signaling a transition to a more mature state.

Valuation

The current P/E stands at 36.42, with a forward P/E of 38.85. Considering the maximum P/E over 5 years at 40.32, the potential upside is limited to just 3%.

Dividends

Old Dominion Freight Line maintains a healthy dividend profile:

• Payout Ratio: 16.91%
• Dividend Yield: 0.47%
• Annual Dividend: $1.90 USD

These figures align with revenue trends, affirming the sustainability of dividend growth.

Opinion

Based on our research, Old Dominion Freight Line emerges as a top-performing stock in the Industrial Sector, specifically within the Ground Transportation Industry, boasting a robust rating of 116%. However, investors should be mindful of the inherent cyclical nature of the industrial sector, which poses a risk for ODFL due to its close ties with the overall US economy.

Despite the cyclical challenges, ODFL is well-positioned to weather economic fluctuations. The current US interest rate of 5.5% has a limited negative impact due to ODFL manageable debt of $0.08 billion. Furthermore, the ground transportation industry’s ability to pass inflation onto customers provides a long-term growth avenue for the company.

In conclusion, Old Dominion Freight Line presents itself as a compelling investment for thematic investors seeking dividend opportunities, especially during periods of higher interest rates. Its robust financial position and strategic industry positioning make it a suitable choice for Buy & Hold active investors.