Old Dominion Freight Line’s (NASDAQ:ODFL) Q4 Sales Beat Estimates
Freight carrier Old Dominion (NASDAQ:ODFL) reported Q4 CY2024 results topping the market’s revenue expectations , but sales fell by 7.3% year on year to $1.39 billion. Its GAAP profit of $1.23 per share was 5.9% above analysts’ consensus estimates.
Revenue: $1.39 billion vs analyst estimates of $1.37 billion (7.3% year-on-year decline, 1% beat)
EPS (GAAP): $1.23 vs analyst estimates of $1.16 (5.9% beat)
Adjusted EBITDA: $422.8 million vs analyst estimates of $419.4 million (30.5% margin, 0.8% beat)
Operating Margin: 24.1%, down from 28.2% in the same quarter last year
Free Cash Flow Margin: 41.3%, up from 23.9% in the same quarter last year
Sales Volumes fell 6.1% year on year (1.5% in the same quarter last year)
Market Capitalization: $39.21 billion
Marty Freeman, President and Chief Executive Officer of Old Dominion, commented, “Old Dominion’s financial results for the fourth quarter reflect the ongoing softness in the domestic economy. While our revenue declined 7.3% in the quarter, our market share remained relatively consistent. In addition, we continued to operate efficiently while maintaining our best-in-class service. Providing our customers with superior service at a fair price remains the cornerstone of our long-term strategic plan, and we were pleased to achieve an on-time service performance of 99% and a cargo claims ratio below 0.1% during the fourth quarter.”
With its name deriving from the Commonwealth of Virginia’s nickname, Old Dominion (NASDAQ:ODFL) delivers less-than-truckload (LTL) and full-container load freight.
The 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.
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Unfortunately, Old Dominion Freight Line’s 7.2% annualized revenue growth over the last five years was mediocre. This was below our standard for the industrials sector and is a tough starting point for our analysis.
Old Dominion Freight Line Quarterly Revenue
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 history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 3.6% annually. Old Dominion Freight Line isn’t alone in its struggles as the Ground Transportation industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.
Old Dominion Freight Line Year-On-Year Revenue Growth
We can better understand the company’s revenue dynamics by analyzing its units sold, which reached 2.84 million in the latest quarter. Over the last two years, Old Dominion Freight Line’s units sold averaged 3.7% year-on-year declines. Because this number is in line with its revenue growth, we can see the company kept its prices fairly consistent.
Old Dominion Freight Line Units Sold
This quarter, Old Dominion Freight Line’s revenue fell by 7.3% year on year to $1.39 billion but beat Wall Street’s estimates by 1%.
Looking ahead, sell-side analysts expect revenue to grow 3.6% over the next 12 months. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below the sector average.
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Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.
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 26.9%. This result 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 operating margin rose by 4 percentage points over the last five years, showing its efficiency has improved.
Old Dominion Freight Line Trailing 12-Month Operating Margin (GAAP)
This quarter, Old Dominion Freight Line generated an operating profit margin of 24.1%, down 4 percentage points year on year. Since Old Dominion Freight Line’s operating margin decreased more than its gross margin, we can assume it was recently less efficient because expenses such as marketing, R&D, and administrative overhead increased.
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Old Dominion Freight Line’s EPS grew at a weak 1.4% compounded annual growth rate over the last five years, lower than its 7.2% annualized revenue growth. However, its operating margin actually expanded during this time and it repurchased its shares, telling us the delta came from reduced interest expenses or taxes.
Old Dominion Freight Line Trailing 12-Month EPS (GAAP)
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
Old Dominion Freight Line’s two-year annual EPS declines of 5.2% were bad and lower than its two-year revenue performance.
In Q4, Old Dominion Freight Line reported EPS at $1.23, down from $1.47 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 5.9%. Over the next 12 months, Wall Street expects Old Dominion Freight Line’s full-year EPS of $5.48 to grow 1.8%.
It was good to see Old Dominion Freight Line narrowly top analysts’ revenue expectations this quarter. We were also happy its EPS and EBITDA outperformed Wall Street’s estimates. Overall, this quarter had some key positives. The stock traded up 2.9% to $188.99 immediately after reporting.
