Incredible Execution From Old Dominion Continuing To Support An Incredible Valuation

I don’t use the word “unique” often, but Old Dominion (NASDAQ:ODFL) might qualify, as this company has built a finely tuned model that not only reliably gains market share in upturns, but produces operating ratios that other less-than-truckload (or LTL) truckers can’t touch. Part and parcel of that is a disciplined capex program that prioritizes modern equipment and incremental service center capacity growth, as well as ongoing investments in technologies that save labor, time, and money.

As was the case in my last write-up, I can’t say anything particularly constructive about valuation where Old Dominion is concerned. The stock has lagged the S&P 500, the industrial sector, and the Dow Jones Transportation average since my last write-up, but pull the comparisons out to a year or more and Old Dominion is pretty much in a class by itself.

The Goldman Sachs analyst covering Old Dominion recently tried to recast Old Dominion as a growth stock, which to me seems like the sort of thing you see near a top. Don’t get me wrong – Old Dominion is one of the best-run companies I follow, and I absolutely expect strong revenue and EBITDA growth over the next couple of years, but when you have to go greater lengths to explain a valuation/target price, there’s a message in that that shouldn’t be ignored.

 

Read the full article here: 

Incredible Execution From Old Dominion Continuing To Support An Incredible Valuation

Old Dominion Rockets Higher As The Downturn Eases

I should have known better than to think that valuation was going to be an impediment to further gains with Old Dominion (ODFL), as the shares of this best-in-class less-than-truckload carrier have shot up another 40% since my late April update. Not only has Old Dominion management reported that the company is regaining share, typically marking the start of a cyclical upturn, the business managed further margin improvement despite revenue pressures.

I don’t really know what more I can say about the valuation. The shares trade at a forward PE that is almost four standard deviations above the long-term average, and likewise, well ahead of what would seem to be a reasonable estimate of future free cash flow, margins, and ROIC. While I’ll grant that lower interest rates do mean that valuations should be higher than historical norms and that top-notch companies deserve premiums, I just can’t really wrap my head around this as anything other than a momentum trade.

 

Read the full article here: 

Old Dominion Rockets Higher As The Downturn Eases

Old Dominion Will Prove Its Superiority Through The Downturn, But The Price Gives Pause

I know, I know … I’ve written plenty of times that I believe Old Dominion (ODFL) is the best less-than-truckload (or LTL) carrier out there, and quite possibly one of the best-run companies I follow irrespective of industry, but it’s always just so darn expensive. And it certainly won’t hurt the “forget about valuation, just buy good companies and hang on…” argument to note that the shares are up another 15% from my last article – a time period over which the S&P 500 fell 10%, the Dow Jones Transport Index fell 23%, and my preferred proxy for industrials likewise fell a little less than 23%.

I honestly have no concerns about Old Dominion heading into this downturn, at least from an operational perspective. The company will probably lose some share to more aggressive pricing, but when economic conditions turn back up, the company will win most of that back on its higher service quality. Likewise, I see no reason why Old Dominion can’t continue its value-conscious organic expansion strategy and build its national share to more than 15% over time. But unless you’re content to accept a roughly 6% expected total return on cash flows, valuation is still problematic.

Click here for the full article:
Old Dominion Will Prove Its Superiority Through The Downturn, But The Price Gives Pause

Like The Energizer Bunny, Old Dominion Just Keeps Going

One of the frustrating (and invigorating) aspects about investing is that you can be completely right … and still end up completely wrong if you’re right about the wrong things. In the case of Old Dominion (ODFL), the year and the market have developed largely as I expected back in April, with the company seeing growing weakness in volumes as the short-cycle industrial sector slowed throughout the year. And yet, with the shares up another 25% since then, what does it really matter?

I have long loved Old Dominion as a company, and if there aren’t case studies written about how this company has crafted a differentiated model in the at least somewhat-commodified less-than-truckload (or LTL) trucking space, then that needs to be fixed. Still, while I do expect a short-cycle recovery to kick in in 2020 and restore some momentum to Old Dominion’s business, I just can’t make any sense of the valuation. Sure, best-in-class operators absolutely deserve a premium, but with the shares already trading more than one standard deviation above the trailing five-year average forward multiple, I just can’t see how the shares are cheap on any fundamental basis.

Click here for more:
Like The Energizer Bunny, Old Dominion Just Keeps Going

Old Dominion Operating At A High Level, But Some Concerning Signs Are Emerging

When I last wrote on Old Dominion (ODFL) in late December, I thought the share price was getting interesting, but wasn’t quite low enough to entice me to buy in ahead of what I believed would be a slower pace of growth in 2019 and 2020. While there are now some signs that slowdown is emerging, the shares are up about 25% since that article. So, let’s just say that earlier call of “not yet…” is not getting printed out and put on the fridge.

I continue to believe, as I’ve long believed, that Old Dominion is a best-of-breed that deserves a premium. I also believe that the ongoing expansion of online retailing is a positive for the less-than-truckload (or LTL) industry, even if Old Dominion itself isn’t all that weighted toward retail. Still, I’m concerned about a slowdown in short-cycle industrial markets in 2019 and 2020 and concerned that Old Dominion could face a one-two punch of more challenging tonnage and pricing. With that, I’m willing to miss out on further gains in Old Dominion shares rather than chase at today’s price.

Click here for more:
Old Dominion Operating At A High Level, But Some Concerning Signs Are Emerging

As Trucking Seems Set To Cool, How Cold Will Old Dominion's Multiple Get?

When I last reviewed Old Dominion (ODFL), I said I didn’t want to pay a near-peak multiple for near-peak earnings, even though I think Old Dominion is the best trucking company out there and one of the best-run companies I’ve followed over the years. The shares subsequently rose another 15% on strong volume, pricing, and cost control, but have since fallen almost 30% from that early September peak and now sits almost 20% lower than when I last wrote about the company.

I love the idea of picking up Old Dominion shares when the Street has bailed out on the less-than-truckload (or LTL) sector, but I’m not sure we're at that point of capitulation yet. Forward multiples have been cut in half in past downturns and we’re not there yet, though I don’t expect 2019 or 2020 to be disastrous. Figuring out the “right” multiple is really difficult right now, but I’d strongly urge readers to keep this stock on a watch list, as you don’t get the opportunity to buy great businesses at reasonable prices all that often, and cyclical sectors like trucking can see some pretty unreasonable valuations at the peaks and troughs.

Continue here:
As Trucking Seems Set To Cool, How Cold Will Old Dominion's Multiple Get?

Is Old Dominion Already At Maximum Overdrive?

LTL trucking company Old Dominion (ODFL) has been on my list of favorite companies for a long, long time, but the volatility of the shares hasn’t always made them a preferred option for my own portfolio. Although the trucking industry continues to see red-hot demand and the sector has done pretty well in the market, Old Dominion’s performance since my last update has lagged peers like Saia (SAIA), ArcBest (ARCB), and YRC Worldwide (YRCW), despite no real let up in performance. Keep in mind, though, that if you stretch the performance timeline out to a year or more, Old Dominion starts looking better.

It’s hard not to like a company that is seeing 20%-plus revenue growth, particularly when demand remains very healthy and supply is constrained by labor difficulties. On top of that, Old Dominion has proven itself over and over again with its investments in IT and its ability to recruit, train, and retain employees, and still has meaningful potential areas of growth. Even still, this is a stock where the forward P/E multiple can fall by half from peak to trough (and it recently hit a peak) and I’m not willing to pay a mid-teens multiple on EBITDA for even one of the best less-than-truckload (LTL) carriers.

Click here to continue:
Is Old Dominion Already At Maximum Overdrive?

Double-Digit Growth Continues To Propel Old Dominion

Forget its top-level performance in the less-than-truckload (or LTL) sector, Old Dominion (ODFL) is one of the better-run companies I've followed for the past decade-plus. Management sticks to what it does best, doesn't jeopardize the model just to please Wall Street in the short term, and continues to build the business for further growth. The only issue with that top-level performance is that it is no secret and Old Dominion's shares are seldom cheap outside of those cyclical downturns where the outlook for the sector is bleak.

Today is the opposite; demand for freight is expanding and Old Dominion is once again demonstrating that it can win share with service quality during such expansions. The shares are already pricing in double-digit EBITDA growth, and I think outperforming those expectations is going to be difficult. While I'd be very slow to sell Old Dominion if I already owned these shares, it's tough for me to argue for it as a buy at today's valuation.

Click here for more:
Double-Digit Growth Continues To Propel Old Dominion

New Opportunities Can Continue To Drive The Old Dominion Story

Old Dominion (NASDAQ:ODFL) is a good example of why it pays to keep an eye on good companies even when their share prices/valuations get a little steep. I thought Old Dominion looked interesting last August amid a marked slowdown in the industry (including the company's first year-over-year declines in tonnage in seven years), but the nearly 40% gain in the share price since then was even more than I had expected. While that is a strong performance next to ArcBest (NASDAQ:ARCB) (not to mention truckload carriers Heartland (NASDAQ:HTLD) and Knight (NYSE:KNX)), I will note that both Saia (NASDAQ:SAIA) and XPO (NYSEMKT:XPO) have done better (though XPO isn't a pure LTL trucking company).

Old Dominion is back to what I would call its more typical valuation situation – relatively expensive compared to its likely medium/long-term earnings and cash flow prospects unless you are willing to give a relatively generous premium for its superior quality. In the “gotta own something” world of institutional investing, though, I can appreciate why Old Dominion is popular now, as the company's performance and the stronger underlying recovery are supporting upward estimate revisions. What's more, Old Dominion's established strategic advantages should enable the company to continue gaining share in the competitive trucking space.

Continue here:
New Opportunities Can Continue To Drive The Old Dominion Story

Saia Heading Northeast And Looking To Unlock More Leverage

The last five years have been good to Saia (NASDAQ:SAIA), as this smaller less-than-truckload (or LTL) carrier has grown its way into a top-10 market position and seen its share price climb over 400%, trouncing ArcBest (NASDAQ:ARCB) and YRC Worldwide (NASDAQ:YRCW), and doing quite a bit better than Old Dominion (NASDAQ:ODFL) as well.

While the company's tonnage growth has been relatively modest (up less than 1% on a compounded basis since 2009), it has been able to improve pricing at a mid single-digit clip, while meaningfully improving its operating ratio by prioritizing better service and more efficient operations. Looking ahead, the company's expansion into the Northeast should drive meaningful revenue growth and help the company improve its operating leverage and asset turnover. The shares isn't like cheap today, though, so this looks more like a name for the watch list than a near-term buy.

Read more here:
Saia Heading Northeast And Looking To Unlock More Leverage

Seeking Alpha: XPO's Painful Climb Toward The Top

It has been a little over a year since I last wrote on XPO Logistics (NYSE:XPO), and I'd like to say that time flies when you're having fun, but that's not the case. As it concerns XPO, the company has used that intervening time to take a very big step toward its goal of being a market share leader along the waterfront of logistics and freight service, but at the cost of significant investor angst and a sharp re-evaluation of the "right" multiple for the business.

The share's value has fallen close to 40% since I last wrote, and my $50-plus fair value at that time was predicated on the company remaining a growth-oriented asset-light third-party logistics company. Instead, the company has pivoted toward a much more balanced asset-heavy/asset-light mix. While that isn't necessarily a bad strategic move, it does change the long-term complexion of free cash flow generation, the volatility of those cash flows, and the multiple the market will be willing to pay for the shares.

There seems to be a recurrent communication issue between the Street and the company, and that concerns me. I don't know if it stems from management being more freewheeling and flexible in its long-term plan than previously thought, or whether there's more of a "making it up as we go along" element to it. In any case, while I do see meaningful value here, management has a lot of work to do to reassure investors about its long-term strategy and about the true synergies of mixing asset-heavy and asset-light businesses in the transportation and logistics space.

Read the full article here:
XPO's Painful Climb Toward The Top

Seeking Alpha: Old Dominion Navigating A Bumpy, Pockmarked Road

When I last wrote about Old Dominion (NASDAQ:ODFL) in December of 2015, I was concerned that a slowdown in the broader U.S. economy was going to weigh on short-term sentiment of this top-notch less-than-truckload (or LTL) carrier. For about a month or so, that did in fact happen, with the shares dropping about 20% to their mid-January lows. Then the industrial rally hit, taking the shares back above $70, before cooling down into summer ahead of yet another small recent rally. All told, the shares are about 2% higher than they were at the time of that last piece - a little worse than Saia (NASDAQ:SAIA), but better than quite a few other peers/comps.

All of that up and down is a pretty good reflection of what seems to be going on in the economy. There are definitely areas of weakness, as manufacturing-heavy MRO distributor MSC Industrial (NYSE:MSM) highlighted recently, but it also seems to be true that the economy is not careering toward disaster. For truckers, it has been messy. The overall upward trend from 2014 is still in place, but there have been some tough months along the way, and the second quarter is not shaping up to be too pretty.

Stock opportunities like Old Dominion are why a lot of professional investors and analysts are grey before age 40. On the positive side, Old Dominion is probably the best-run trucking company out there (at least in the LTL space) and it still has room to grow to over 10% national share and improve its margins even further. It's also trading below its historical average EV/EBITDA multiple. On the negative side, the second quarter is probably going to be ugly on both a revenue and cost/operating leverage basis, and I don't think a big volume/tonnage rebound is in the cards until after this year.

Cyclical stocks like Old Dominion can get very weak during the doldrums, even while everybody acknowledges that better days will come again and the company will do well then. I find the long-term valuation pretty appealing, but this might be the sort of stock to buy in pieces (dollar-cost averaging) if you're concerned about the economy over the next six to 12 months.

Continue here:
Old Dominion Navigating A Bumpy, Pockmarked Road

Seeking Alpha: Old Dominion's Operating Environment Has Shifted

Maybe the nicest thing I can say about Old Dominion's (NASDAQ:ODFL) performance since my last update on this leading less-than-truckload carrier is that even in a rough patch for trucking, the company has continued to do better than most of its peers. The shares are down about 20% over the past nine months, but ArcBest (NASDAQ:ARCB), Saia (NASDAQ:SAIA), and Roadrunner (NYSE:RRTS) have all done notably worse, with YRC Worldwide (NASDAQ:YRCW) the only notable outperformer excluding M&A.

My prior positive view on Old Dominion was predicated on a healthy economy and continuing excellence in operation, and only the second of those has really materialized. I continue to believe it is the best-run trucking company out there (at least in the LTL space), but a softer industrial economy, reduced truckload spillover, and changing shipping patterns are creating notable headwinds. Although I believe the shares are trading at an interesting valuation today, the Street will likely want to see weight trends and economic activity improve before getting significantly more bullish.

Continue reading here:
Old Dominion's Operating Environment Has Shifted

Seeking Alpha: Old Dominion's Performance Argues For Paying Up For Quality

It has been a while since Old Dominion (NASDAQ:ODFL) has looked cheap by conventional valuation standards, but then the company has logged a strong stretch of better-than-average performance. Almost a year ago, I thought that Old Dominion was a good stock to consider despite its valuation and the company's strong operating performance has led to better than 30% appreciation since then - well ahead of other trucking peers like Con-way (NYSE:CNW), ArcBest (NASDAQ:ARCB), YRC Worldwide (NASDAQ:YRCW), and Saia (NASDAQ:SAIA).

Old Dominion remains what it has been for some time - an exceptionally well-run trucking company that still has the opportunity to take share from less efficient rivals. The same is true on the valuation side, as this is a stock that is more challenging to argue is undervalued. Paying a low teens multiple to EBITDA doesn't seem unreasonable if expectations of mid-teens EBITDA growth prove accurate, but I can understand why some investors may hesitate to pay a premium for a company that is in a competitive, regulated, and cyclical industry.

Read more here:
Old Dominion's Performance Argues For Paying Up For Quality

Seeking Alpha: Old Dominion Continues To Take Share

As I expected back in February, Old Dominion's (ODFL) fourth quarter was just a bump on the road and business has gotten back to normal. Normal is a very good thing for Old Dominion, as the company's superior service quality continues to fuel share gains and good cost control allows the company to thrive with relatively lower price increases than its competition. Old Dominion shares aren't cheap by standard valuation metrics, but I believe standard metrics may be a little too confining for a significantly above-average operator.

Read the full article here:
Old Dominion Continues To Take Share

Seeking Alpha: A Small Skid At Old Dominion Isn't A Big Deal

Less than truckload (aka LTL) transportation company Old Dominion (ODFL) did something last week that it doesn't do often - it disappointed the Street and saw some margin erosion. Weather seems to have been a major contributing factor, though, and the company continues to show significantly better tonnage growth than its peers, while hauling that freight much more profitably. Old Dominion isn't exceedingly cheap, having risen another 15% since my last write-up, but it is still slightly undervalued and still an excellent stock for the long term.

Please continue here:
A Small Skid At Old Dominion Isn't A Big Deal

Seeking Alpha: YRC Worldwide Will Probably Survive, But Can It Thrive?

I've made no secret in the past that I think less-than-truckload trucking company Old Dominion (ODFL) is one of the best-run companies out there. In contrast, the largest less-than-truckload carrier, YRC Worldwide (YRCW), is very definitely *not* one of the best-run companies out there. With the shares trading at only a shadow of their former value and real concerns about whether the company can manage an upcoming liquidity squeeze, a lot of investors have written off YRC Worldwide.

I'm pretty much on board with that thinking. I am not all that certain that bankruptcy is inevitable. A pre-packaged bankruptcy filing could certainly become an option as the company struggles under the weight of over $1 billion in net debt, but I suspect that the Teamsters union is going to make a deal with YRC Worldwide similar to the one it granted Arkansas Best (ABFS) - a deal that gives the company meaningful wage and cost flexibility up front in exchange for profit-sharing down the line and the labor stability the company needs to renegotiate its debt.

I'm not saying that investors should pile into YRC Worldwide with the expectation of the better than 4x returns that Arkansas Best has delivered (and I'm definitely not investing my own money here!), but I'm very curious to see how the Street will weigh out the risks of YRCW failing to renegotiate its debt (and/or failing to secure concessions from the Teamsters) and its overall lack of impressive operating fundamentals.

Follow this link to continue:
YRC Worldwide Will Probably Survive, But Can It Thrive?

Seeking Alpha: Expectations For Arkansas Best May Be Higher Than They Seem

National less-than-truckload (LTL) trucking company Arkansas Best (ABFS) has been one of the best turnaround stories of 2013, as a new Teamsters agreement with meaningful cost concessions gives the company a real chance to repair one of the worst cost structures in the industry. With that, the shares have rocketed up more than 200% this year, and 300% from the 52-week low.

Even with that major leap, it would seem that the company is not getting all its due. The shares trade at about 4.6x the current average EBITDA estimate for 2014, against a long-term average of about 4.5x and industry averages that often run in the 6x to 8x range. On the other hand, Arkansas Best could still be facing significant pension liabilities, and the company may find it difficult to meet some aggressive growth goals. All told, I'm intrigued by what Arkansas Best could become again, but it's for me to not still prefer the more richly-valued (but better-run) Old Dominion (ODFL).

Please continue here:
Expectations For Arkansas Best May Be Higher Than They Seem

Seeking Alpha: Old Dominion Isn't Done Yet

Earlier this year, I thought the Street's reaction Old Dominion's (ODFL) fourth quarter results offered investors a good opportunity to buy shares in this high-quality, growing trucking company. Since then, the shares are up about 30% - more than doubling the return of the S&P 500. Although that performance is more mixed relative to other trucking companies- better than Con-Way (CNW), but inferior to Arkansas Best (ABFS), YRC Worldwide (YRCW), and Saia (SAIA) - Arkansas Best and YRC have benefited from a major catch-up trade and still notably lag Old Dominion on a two-year comparison.

While valuation on the shares has moved up, I don't think the opportunity is over for Old Dominion or its shareholders. The company continues to gain share in the less-than-truckload industry, and I believe the company's combination of service quality, organic growth potential, and strong margin leverage can continue to deliver good returns.

Please continue here:
Old Dominion Isn't Done Yet

Investopedia: Intermodal Growth Continues To Push J.B. Hunt Higher

Sometimes it's tempting to just say “okay, valuation doesn't matter”, throw caution to the wind, and go into a growth story like J.B. Hunt (Nasdaq:JBHT). After all, with seemingly every quarter this company demonstrates why it's one of the leaders in the still-growing intermodal space. While the stock did lag the S&P 500 over the last quarter, it continues to enjoy rich multiples and ample support on the sell-side. Even though I really do like this company and wish I had bought the stock four years ago, I still can't resolve the valuation in light of the probable returns and cash flow that this business will produce.

Please click the link to continue reading:
http://www.investopedia.com/stock-analysis/071513/intermodal-growth-continues-push-jb-hunt-higher-jbht-hubg-pacr-odfl.aspx