Old Dominion Stock: Shares Are a Bargain Even Though They Don't Look It

Core Viewpoint - The August update from Old Dominion Freight Line indicates a continuation of negative trends in freight demand, but the company's long-term value proposition remains intact due to its pricing discipline and operational efficiency [2][3]. Financial Performance - Revenue per day decreased by 4.8% year over year, with LTL tons per day down 9.2%, driven by an 8.2% drop in shipments per day and a 1.2% decline in weight per shipment [5][6]. - In Q2, tons per day were down 7.7% and shipments per day slipped 6.7%, indicating a worsening freight environment [6]. - Q2 revenue fell 6.1% year over year, and earnings per share declined 14.2% [7]. Operational Metrics - The operating ratio increased to 74.6% from 71.9% a year ago due to lower volumes [8]. - Despite challenges, Old Dominion maintained a 99% on-time service level and a cargo claims ratio of just 0.1% [8]. Pricing Strategy - LTL revenue per hundredweight increased by 4.5% in the quarter to date, and 4.7% excluding fuel surcharges, showcasing the company's ability to protect pricing even in a slowing freight market [9]. Future Outlook - Old Dominion is positioned to benefit from a recovery in freight demand, with plans for $450 million in capital spending this year to enhance its operational capabilities [12]. - The company has returned $543 million to shareholders in the first half of 2025, indicating strong cash flow and commitment to reinvestment [12]. Competitive Position - Old Dominion's strategy of maintaining operational efficiency and pricing discipline during downturns allows it to gain market share, distinguishing it from weaker competitors [13].