Old Dominion posts first drop in quarterly year-over-year revenue since late '09

Even the company that is arguably the best run less-than-truckload (LTL) carrier in the country can't make industrialized freight materialize out of thin air.

Old Dominion Freight Line Inc. reported second-quarter revenue of $755.4 million, a 0.9-percent drop from the year-earlier period, and its first year-over-year quarterly revenue decline since the fourth quarter of 2009. The Thomasville, N.C.-based carrier posted a 5.3-percent year-over-year drop in operating income in the quarter.

Old Dominion's top line was hit by a drop in revenue from diesel fuel surcharges, as well as reduced "non-LTL" revenue from segments such as container drayage and global ocean freight forwarding. Revenue for each 100 pounds transported rose 0.8 percent over the 2015 period and increased 2.7 percent when backing out the impact of reduced fuel surcharges; both were signs that industry pricing generally remains stable, Old Dominion said. However, a 1-percent year-over-year decline in weight per shipment, combined with unfavorable changes in its product mix, hurt yields in the quarter, the company said.

Daily tonnage fell 0.3 percent year-over-year, while shipment volumes rose 0.6 percent, Old Dominion said.

Operating ratio, a key metric of operating efficiency, increased slightly to 82.3 percent, meaning that 82.3 cents of every revenue dollar went to running the company. Old Dominion's second-quarter operating ratio of 81.5 percent was an all-time company record. The higher ratio reported in the 2016 quarter was due in part to the manner in which capacity investments were expensed, Old Dominion said.

David G. Ross, analyst for the investment firm Stifel, said Old Dominion has vowed to remain disciplined on price. Given the sluggish volume growth that has plagued the LTL industry for many months, Old Dominion will find it difficult to gain new share at its current rate structure, Ross said.