Thursday, 18 April 2024

Why Old Dominion Freight Line Stock Is Falling Today

by BD Banks

J.B Hunt Transport sounded the alarm on weakness in the trucking business, and Old Dominion Freight Line (NASDAQ: ODFL) is taking notice. Shares of Old Dominion are down 5% as of 12:30 p.m. ET following J.B. Hunt’s worse-than-expected earnings report.

Reading between the lines after a rival reports

Investors in trucking companies have been on a wild ride in recent years. The pandemic initially wiped out demand, but the e-commerce boom that followed created a significant need for trucks to restock inventories and make deliveries. In 2023, companies saw demand weaken as customers pulled back on expansion due to questions about the economy.

If J.B. Hunt is to be believed, things didn’t improve in the first three months of 2024. On Wednesday, the company reported first-quarter results that fell short of top-line and bottom-line expectations due to soft demand and higher costs.

Each company’s cost structure is different, but the market viewed the commentary regarding demand as a harbinger of things to come for other truckers. Shares of Old Dominion and other truckers, including XPO and Knight-Swift Transportation Holdings, fell in response to J.B. Hunt’s results.

Is Old Dominion Freight Line stock a buy heading into earnings?

We’ll know more on April 24 when Old Dominion is scheduled to release its first-quarter results, but today’s reaction is understandable. Trucking is a cyclical business, so if one big trucker is seeing weak demand, it’s likely an industrywide problem.

Shares of Old Dominion have tripled in the last five years alone. The company has been a long-term winner because it’s among the best-run trucking companies, allowing it to better navigate downturns and beat out competition when pricing is strong.

But after a wave of consolidation and the failure of a few poorer operators, the industry has never been more competitive. Last quarter, for example, other companies delivered results indicating they’re managing through the current environment better than Old Dominion.

Given the uncertain macro climate, investors would be wise to wait to hear from Old Dominion instead of jumping in on this weakness.

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Lou Whiteman has positions in XPO. The Motley Fool has positions in and recommends Old Dominion Freight Line. The Motley Fool recommends XPO and 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.