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Old Dominion Freight Line Inc Ordinary Shares ODFL

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Tonnage, Yields, and Margins Show Scant Signs of Easing in Old Dominion’s Q2, but Shares Rich

Matthew Young, CFA Equity Analyst

Analyst Note

| Matthew Young, CFA |

In the second quarter, Old Dominion’s top line surged 47% year over year, ahead of our expectations thanks to material market share gains rooted in the firm’s top-shelf network capabilities. Relative to the same period last year, growth stems from robust underlying freight demand and excellent pricing conditions stemming from constrained capacity across the broader trucking landscape. Tonnage growth remains remarkable, jumping 28% (it was up a solid 8% last quarter) due in part to an easy comparison (initial pandemic pressure), but retail end markets are incredibly robust on heavy retailer restocking (ultra-low inventory levels) and industrial end markets are recuperating. OD is also grabbing meaningful market share thanks to its disciplined capacity investment over the years, while most competitors haven’t expanded their service center footprints. In short, OD has sufficient capacity to handle surging shipment opportunities that other carriers must turn down. We believe mid- to high-teens tonnage growth is on tap for this year. Average yield (revenue per hundredweight) excluding fuel surcharges spiked 28% on very healthy core pricing and lower shipment weights.

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Company Profile

Business Description

Old Dominion Freight Line is the third- largest less-than-truckload carrier in the United States, with more than 240 service centers and 9,200-plus tractors. OD is by far one of the most disciplined and efficient providers in the trucking industry, and its profitability and capital returns stand head and shoulders above its peers. Strategic initiatives revolve around increasing network density through market share gains and maintaining industry- leading service via consistent infrastructure investment.

500 Old Dominion Way
Thomasville, NC, 27360
T +1 336 889-5000
Sector Industrials
Industry Trucking
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 19,779

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