Old Dominion Scores Win in 3Q Earnings, Surges Past Wall Street Forecasts
Old Dominion Freight Line Inc. reported a 20% climb in profits to $102.3 million, or $1.24 per share, 8 cents better than the Bloomberg News consensus forecast of analysts. One year ago, the numbers were $85.6 million or $1.03.
“Hurricane Who-vy? Hurricane Ir-what? Winners don’t make excuses, and Old Dominion just dropped a solid beat on the Street,” Stifel, Nicolaus & Co. analyst Dave Ross wrote. “As a result of the above quality service, the company not only has less customer churn but attracts new business that doesn’t like its freight arriving late or getting damaged. By not having to regularly go on ‘apology tours’, its salesforce can trust the new business won to be handled well and therefore spend most of its time hunting for new accounts."
Old Dominion Freight Line ranks No. 11 on the Transport Topics Top 100 list of for-hire carriers in North America.
The Thomasville, N.C.-based company also announced revenue grew 12% to $873 million, more than enough to compensate for the 9.9% jump in operating expenses to $709.1 million, due mostly to the company hiring more employees and offering a pay hike in September.
“Our third-quarter results, once again, validated the financial profile we’ve discussed with you for many years. Our revenue growth that included increases in both freight density and yield combined with other efficiency improvements generated the operating leverage to improve margins by 120 basis points and produce a company record third-quarter operating ratio of 81.2%. How about that?” CEO David Congdon said on an earnings call.
Old Dominion thrived in the quarter despite the fact that there was one fewer operating day than a year ago. Total miles still climbed 4.9% to 156.3 million. Tonnage per day rose 8.6% to 34,762 and the number of shipments increased 5% to 2.8 million. Excluding fuel surcharges, revenue per 100 pounds of freight went up 2.4% to $17.31, revenue per intercity mile improved 5.6% to $5.46 and revenue per shipment jumped 4.2% to $273.38. Weight per shipment improved 1.8% to 1,579. Length of haul ticked down ever so slightly by 0.6% to 919 miles.
But Congdon warned against reading too much into the revenue per 100 pounds of freight number.
“Rising weight per shipment and lower length of haul typically have the impact of reducing revenue for hundredweight. While we have said this many times and because of its importance we want to emphasize that we have not changed our pricing philosophy,” he said.
Old Dominion recently announced a 3.5% rate hike as of Sept. 1.
“We said in the past we don’t turn the price/volume knob one way or the other to try to raise prices to slow down tonnage or to lower prices to raise tonnage. We have to be consistent with being fair and equitable with our customers on price,” Congdon said.
Unlike other less-than-truckload carriers, such as YRC Worldwide and Southeastern Freight Lines, the hurricanes in Texas and Florida didn’t drag down results.
“It was a little bit of an impact on revenue as well and certainly we saw that in the middle part of September. There was about four or five days of impact when the Southeast was - we had some terminals closed and so forth,” Chief Financial Officer Adam Satterfield said. “But that’s when we get to that latter part of the month I think that our ability to restore our operations, get back on track and the lack of reliance of purchased transportation within our network and being able to manage our freight with best-in-class service we think was a big driver in that acceleration in our revenue growth for those last few weeks of the month. And that’s continued to date thus far into October.”
