Friday, 7 June 2024

Why Old Dominion Stock Is Decelerating Today

by BD Banks

Trucking company Old Dominion Freight Line (NASDAQ: ODFL) is seeing an uptick in activity, but not quite at the levels that investors had hoped.

Shares of Old Dominion traded down about 4% as of 11 a.m. ET following the company’s mid-quarter business update.

Moving out of the slow lane?

Old Dominion and other truckers have been moving in the wrong direction of late. The company’s shares are down 25% from their 2024 highs due to soft demand. Shipping customers are worried about the health of the U.S. economy and are trimming inventories as a result.

Late Wednesday, Old Dominion said that May revenue was up 5.6% year over year thanks to a 2.3% increase in shipments per day. That’s an improvement, but it is a far cry from the 18.6% jump in May shipments per workday reported by rival Saia earlier in the week.

Shares of Old Dominion and other truckers moved higher on Saia’s release as investors hoped it was a sign of a rapid recovery in demand. The stocks are now giving back those gains based on Old Dominion’s commentary.

Is Old Dominion stock a buy?

There are a lot of unknowns feeding into these numbers. Saia participated in the auction for assets sold by bankrupt Yellow, which could help to boost its year-over-year comparisons. Old Dominion is famously conservative in both acquisitions and pricing, and may be focused on stability over incremental gains in a still uncertain market.

One month’s data, or even one quarter’s results, are not enough to judge the quality of a trucking company.

Old Dominion historically has been among the industry’s top performers, and there are no indications the company’s reputation is slipping. That said, the industry today is much better run and competitors like Saia are better able to match Old Dominion blow for blow.

Investors buying into Old Dominion today will likely get a solid, market-beating performance over time, but there are no guarantees the company will outrun its rivals in the short term. With transportation stocks, patience is sometimes required.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Old Dominion Freight Line. The Motley Fool recommends the following options: long January 2026 $195 calls on Old Dominion Freight Line and short January 2026 $200 calls on Old Dominion Freight Line. The Motley Fool has a disclosure policy.