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Freight carrier Old Dominion (NASDAQGS:ODFL) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 6.1% year on year to $1.50 billion. It made a GAAP profit of $1.48 per share, improving from its profit of $1.33 per share in the same quarter last year.
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Old Dominion Freight Line (ODFL) Q2 CY2024 Highlights:
- Revenue: $1.50 billion vs analyst estimates of $1.50 billion (small miss)
- EPS: $1.48 vs analyst estimates of $1.45 (1.9% beat)
- Gross Margin (GAAP): 40.8%, up from 40% in the same quarter last year
- Sales Volumes rose 3.1% year on year (-11.5% in the same quarter last year)
- Market Capitalization: $42.12 billion
With its name deriving from the Commonwealth of Virginia’s nickname, Old Dominion (NASDAQGS:ODFL) delivers less-than-truckload (LTL) and full-container load freight.
Ground TransportationThe growth of e-commerce and global trade continues to drive demand for shipping services, especially last-mile delivery, presenting opportunities for ground transportation companies. The industry continues to invest in data, analytics, and autonomous fleets to optimize efficiency and find the most cost-effective routes. Despite the essential services this industry provides, ground transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Over the last five years, Old Dominion Freight Line grew its sales at a decent 7.6% compounded annual growth rate. This shows it was successful in expanding, a useful starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Old Dominion Freight Line's recent history shows its demand slowed as its revenue was flat over the last two years. We also note many other Ground Transportation businesses have faced declining sales because of cyclical headwinds. While Old Dominion Freight Line's growth wasn't the best, it did perform better than its peers.
Old Dominion Freight Line also reports its sales volumes, which reached 3.1 million in the latest quarter. Over the last two years, Old Dominion Freight Line's sales volumes averaged 4.3% year-on-year declines. Because this number is lower than its revenue growth, we can see the company benefited from price increases.
This quarter, Old Dominion Freight Line grew its revenue by 6.1% year on year, and its $1.50 billion of revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 6.8% over the next 12 months.
Operating Margin Operating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Old Dominion Freight Line has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 26.4%. This isn't surprising as its high gross margin gives it a favorable starting point.
Analyzing the trend in its profitability, Old Dominion Freight Line's annual operating margin rose by 8 percentage points over the last five years, showing its efficiency has significantly improved.
In Q2, Old Dominion Freight Line generated an operating profit margin of 28.1%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
EPS Analyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Old Dominion Freight Line's EPS grew at a weak 2.1% compounded annual growth rate over the last five years, lower than its 7.6% annualized revenue growth. However, its operating margin actually expanded during this timeframe, telling us non-fundamental factors affected its ultimate earnings.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. Although it wasn't great, Old Dominion Freight Line's two-year annual EPS growth of 4% topped its flat revenue.
In Q2, Old Dominion Freight Line reported EPS at $1.48, up from $1.33 in the same quarter last year. This print beat analysts' estimates by 1.9%. Over the next 12 months, Wall Street expects Old Dominion Freight Line to grow its earnings. Analysts are projecting its EPS of $5.84 in the last year to climb by 7.1% to $6.25.
Key Takeaways from Old Dominion Freight Line's Q2 Results It was encouraging to see Old Dominion Freight Line beat analysts' volume and EPS expectations this quarter. On the other hand, its revenue unfortunately missed, showing it had to lower prices. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on track. The stock traded up 2.3% to $198.50 immediately following the results.
