Old Dominion Freight Line turns in very strong Q4 earnings

Thomasville, N.C.-based less-than-truckload (LTL) carrier Old Dominion Freight Line (ODFL) announced very strong fourth quarter earnings this week.

“The strength of Old Dominion’s fourth quarter financial performance resulted in new Company records for annual revenue and profitability,” said ODFL President and CEO Greg Gantt in a statement. “Our financial results for the quarter—and the year—continue to reflect the consistent execution of our long-term strategic plan. As part of this plan, we focus on providing superior service at a fair price while also consistently investing in our capacity to support anticipated growth in future periods. Our ability to consistently deliver this high-quality service and capacity, coupled with a positive domestic economy, has driven strong customer demand for our service offerings. We do not expect any near-term changes in our customer demand trends and believe our service and capacity advantages will continue to support our ability to win additional market share throughout 2022.”

Quarterly revenue, at $1.41 billion was up 31.4% annually, with LTL services revenue, at $1.39 billion, also posting a 31.4% annual gain. Operating income saw a 46.5% annual increase, to $372.5 million, and net income was up 46.9%, to $278.8 million. Diluted earnings per share, at $2.41, posted a 49.7% increase.

Notable quarterly ODFL metrics included:

• a 16.1% increase in LTL revenue per hundredweight, which drove revenue growth;
• a 14.3% increase in LTL tons per day, which included a 17.5% increase in LTL shipments per day that was partially offset by a 2.7% decrease in LTL weight per shipment; and
• LTL revenue per hundredweight, excluding fuel surcharges, rose 9.2%, benefitting from the decrease in which ODFL’s weight per shipment and the 1.8% increase in its average length per haul and the changes to each of these metrics having the effect of increasing its reported yields

Gantt said that the increase in LTL revenue per hundredweight also reflects the success of ODFL’s long-term pricing strategy, which is to consistently improve the profitability of each customer account by increasing its yields to both offset cost inflation and support further investments in capacity and technology.

ODFL said that fourth quarter capital expenditures were $165.4 million and $550.1 million for the year. ODFL said it expects its aggregate capital expenditures for 2022 to total approximately $825 million, including planned expenditures of $300 million for real estate and service center expansion projects; $485 million for tractors and trailers; and $40 million for information technology and other assets.

2022 outlook: Gantt said at last week’s SMC3 Jump Start 2022 conference in Atlanta that ODFL is rather bullish on 2022 and thinks the economy is going to be strong.

“We know the industrial economy is very strong right now. There is money out there to spend, and the consumer economy is good, too.”

Looking back at 2021, Gantt described the year as extremely strong, with ODFL seeing the same trends so far into 2022.

“We know our customers’ inventories are low and that there is still going to be a resupply going on,” he said. “With that and other things in play, we remain bullish on 2022. All modes, whether it be truckload, LTL, rail or whatever, will have their hands full as it relates to that. We have a lot of the economy sitting on the water out at the Port of Los Angeles and Port of Long Beach. There is an awful lot of stuff to be moved.”

With the LTL sector riding high, due to current market conditions related to the pandemic, Gantt quipped it would be nice if the high level of demand for LTL services went on indefinitely.

“There are cycles…and we have been through the down cycles,” he said. “2016 was a down cycle, and 2017 and 2018 went up, with 2019 kind of flat, and then Covid hit in 2020. We have been through the downcycle and this is really our second year of an up cycle. Certainly, we think we will be busy this year. We think that at least for the foreseeable future it looks pretty good.”

Another driver for LTL sector growth in 2022 is the strength of the consumer economy, observed Gantt.

“People have money to spend, and the government put a lot of money into people’s pockets,” he said. “If people have money, they are going to spend it, and that is what is going to drive this thing, at least for the foreseeable future. Hopefully, everybody goes back to work, and, at some point in time, if the pandemic subsides like we think hope and hear that it will, then I think we will really be back in business in all of the industries we live and die by. That is what we are hoping for anyway.”

On the manufacturing side, Gantt said that it is concerning how output will fare in 2022, due to the securing and sourcing of certain components and commodities, too, such as aluminum and steel.

Part of that is due to a lack of workforce, as well as the ongoing semiconductor shortage and truck manufacturing challenges, which he said is a “big deal” for the LTL sector.

“There is concern there, even though there is easing in some parts of manufacturing,” he said.

Should there be a pronounced shift from consumer spending to services, Gantt said that even with that type of pent-up demand, trucking remains in a good spot.

“That pent-up demand needs to be met before we can get to the end of the cycle,” he said.