On Thursday, BofA Securities adjusted its price target for Old Dominion Freight Line (NASDAQ:ODFL), decreasing it to $195.00 from the previous $206.00. Despite the adjustment, the firm maintained a Neutral rating on the stock.
This revision follows Old Dominion's third-quarter earnings report, where the company disclosed earnings per share (EPS) of $1.43. This figure represents a 7% decline from the same quarter last year but slightly exceeds the anticipated $1.42 consensus.
The company's operating income for the quarter was reported at $402 million, falling short of expectations by $5 million, equating to $0.02 per share. A contributing factor to the better-than-expected EPS was a lower tax rate of 23.4%, compared to the estimated 25%, adding $0.03 per share.
However, a 3% year-over-year drop in revenues led to negative fixed cost leverage, which in turn pressured the results. Consequently, Old Dominion experienced a rise in its operating ratio to 72.7%, up 210 basis points from the previous year and 30 basis points higher than targeted.
For October, Old Dominion noted a 9.5% decrease in tons per day compared to the same period last year, which the company attributes to challenging comparisons due to gains made in the wake of the Estes cyber-attack.
Looking ahead, Old Dominion forecasts a 7% decline in tons per day for the fourth quarter of 2024. The company anticipates fourth-quarter revenues to reach approximately $1.35 billion, marking a 9-10% decrease year-over-year, which is slightly more pessimistic than the $1.36 billion previously estimated, reflecting a 3% year-over-year reduction.
Old Dominion also anticipates a 100 basis point negative leverage effect, exacerbating the typical seasonal deterioration of the operating ratio by 200-250 basis points between the third and fourth quarters. As a result, the company expects the operating ratio for the fourth quarter to be between 75.7% and 76.2%, which is less favorable than the prior target of 74.3%.
This outlook has led to a 12% cut in the fourth-quarter EBIT target, now set at $326 million, and a 13% decrease in the fourth-quarter EPS estimate. These projections also carry over into the company's expectations for 2025.
InvestingPro Insights
To complement the analysis of Old Dominion Freight Line's recent performance and outlook, InvestingPro data provides additional context for investors. Despite the challenges outlined in the earnings report, ODFL maintains a strong financial position. The company's P/E ratio stands at 34.88, indicating that investors are still willing to pay a premium for its shares, possibly due to its long-term growth prospects.
An InvestingPro Tip highlights that ODFL has raised its dividend for 8 consecutive years, demonstrating a commitment to shareholder returns even in challenging market conditions. This is further supported by the company's dividend growth of 30% over the last twelve months, as per InvestingPro data.
Another relevant InvestingPro Tip notes that ODFL holds more cash than debt on its balance sheet, which could provide financial flexibility as the company navigates the current market headwinds. This strong balance sheet position may help ODFL maintain its operations and strategic initiatives despite the anticipated decline in revenues and operating ratio pressures.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for ODFL, providing a deeper understanding of the company's financial health and market position.
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