February 9, 2018

Old Dominion posts record results in quarter, says LTL pricing strengthened

Double-digit gains across the board for the well-run carrier.

By DC Velocity Staff

Less-than-truckload (LTL) carrier Old Dominion Freight Line Inc. kept rolling in the fourth quarter, posting a 19.5-percent year-over-year revenue gain to an all-time quarterly record $891.1 million, and a 26.5-percent jump in operating income to $143.4 million, also a record for any quarter.

For the year, the Thomasville, N.C.-based carrier reported that revenue rose 12.3 percent, to more than $3.35 billion. Operating income rose 19 percent, to $575 million.

Tonnage rose 14.4 percent in the quarter, the company said. Based on tonnage data reported for October and November, it is believed December was the quarter's strongest month, with approximately a 16-percent year-over-year increase. Shipment volumes rose 11.4 percent, while weight per shipment climbed 2.7 percent. Revenue per "hundredweight," or for each 100 pounds hauled, increased 3.1 percent in the quarter, excluding a 200-basis-point contribution from fuel surcharges, Old Dominion said.

David S. Congdon, the company's vice-chairman and CEO, said the gain in hundredweight revenue is a sign the LTL sector's pricing environment accelerated in the fourth quarter. Pricing has firmed strongly in LTL, and in the much larger truckload segment, due to the combined effects of tight capacity and solid freight demand from an improving U.S. economy.

Old Dominion did not comment on its outlook for general rate increases. "Consistent with our long-term pricing philosophy, we will continue to target rate increases necessary to offset cost inflation in our business and (to) address individual account profitability."

The Company's fourth-quarter operating ratio—the ratio of expenses to revenues—improved by 90 basis points over the prior year, to 83.9 percent, meaning Old Dominion spent 83.9 cents for every $1 in revenue. The company continued to report remarkable metrics for delivery reliability and shipment safety, with on-time deliveries of 99 percent and a cargo-claims ratio of less than 0.3%.

In a note yesterday, Benjamin J. Hartford, transport analyst for investment firm Robert W. Baird & Co. Inc., called the results "solid," but said they were largely expected by the market and largely priced into the equity. Solid economic and industry fundamentals support a strong case for Old Dominion outperformance through 2018, Hartford said.

Old Dominion's stock price, which has climbed by two and a half times in the past two years, fell by $10.30 a share, to $131.71 amid a very weak equity market.

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