QUOTE AND NEWS
Market Intelligence Center  Mar 13  Comment 
MarketIntelligenceCenter.com's option-trade picking algorithms have identified an attractive covered-call trade on Old Dominion Freight Line Inc (ODFL). Look at the Jul. '15 $75.00 covered call for a net debit in the $72.71 area. This trade has a...
Market Intelligence Center  Mar 6  Comment 
MarketIntelligenceCenter.com's option-trade picking algorithms have identified an attractive covered-call trade on Old Dominion Freight Line Inc (ODFL). Look at the Jul. '15 $75.00 covered call for a net debit in the $72.44 area. This trade has a...
Market Intelligence Center  Feb 2  Comment 
After closing Friday at $70.12, Old Dominion Freight Line Inc (ODFL) presents an attractive opportunity to get a 4.76% return in just 74 days, which is an annualized return of 23.47% (for comparison purposes only). To enter this trade, sell one...
Market Intelligence Center  Jan 23  Comment 
The patented option-trade picking algorithms that power MarketIntelligenceCenter.com's Artificial Intelligence Center have selected a covered-call trade on Old Dominion Freight Line Inc (ODFL) that includes 7.72% downside protection. Sell one...
Market Intelligence Center  Jan 20  Comment 
For a hedged play on Old Dominion Freight Line Inc (ODFL) MarketIntelligenceCenter.com’s patented trade-picking algorithms recommend the Apr. '15 $70.00 covered call for a net debit in the $67.49 area. That is also the break-even stock price for...
Market Intelligence Center  Jan 9  Comment 
For a hedged play on Old Dominion Freight Line Inc (ODFL) MarketIntelligenceCenter.com’s patented trade-picking algorithms recommend the Apr. '15 $75.00 covered call for a net debit in the $71.46 area. That is also the break-even stock price for...
Market Intelligence Center  Dec 17  Comment 
After Tuesday’s trading in Old Dominion Freight Line Inc (ODFL) the algorithms behind MarketIntelligenceCenter.com's Artifical Intelligence Center picked out a trade that offers a 5.32% or 16.05% (for comparison purposes only), while providing...




 

Old Dominion Freight Line (ODFL) is a trucking company that primarily ships consumer goods. ODFL is the sixth largest less-than-truckload (LTL) firm in the U.S. based on revenue[1]. As a LTL shipper, Old Dominion consolidates freight from several customers in one trailer-load. Compared to truckload shippers who contract an entire trailer-load to a single client, LTL companies need broad networks of pickup and delivery service centers, as well as larger “breakbulk” facilities where shipments are consolidated and separated. Companies also need complex IT systems in order to track freight status information. The asset-intensive nature of the LTL business provides a barrier to entry for new firms. Besides its primary LTL business, Old Dominion also offers domestic and global expedited (shipments that need to move more quickly than normal service, usually at a higher cost) and logistical services.

As a transportation company, Old Dominion’s earnings are closely tied to the overall health of the economy. The firm maintains a diversified consumer base, with no client accounting for more than 2% of revenues, and limited exposure to the cyclical housing and automotive markets[1]. Another concern is rising fuel prices. Another challenge Old Dominion must contend with is the entry of shipping giants FedEx and UPS into the LTL business. These firms bring extensive resources and strong brand names into the LTL market.

Business Overview

Old Dominion operates as one business segment with four brands: OD-Domestic, OD-Expedited, OD-Global, and OD-Technology[2]. Domestic LTL shipping has historically comprised over 90% of revenues[3]. A focus on higher freight density (metrics include weight per shipment and average revenue per service center) and expansion of its service center network have helped ODFL generate one of the highest operating margins of any public LTL firm.

Business & Financial Metrics[4]

In 2009, ODFL generated a net income of $34.9 million on $1.25 billion in total revenues. This represents a 49.2% decrease on a 19.0% decrease in total revenues from 2008, when the company earned $68.7 million on $1.54 billion in total revenues.

Business Segments

ODFL operates as one reportable business segment but offers its products and services through four branded groups: OD-Domestic, OD-Expedited, OD-Global, and OD-Technology.

Trends and Forces

Old Dominion’s Business is Affected by Economic Conditions

As a transportation company, Old Dominion relies on a healthy economy to keep goods moving about the country. The firm maintains a diversified consumer base, with no client accounting for more than 2% of revenues, and limited exposure to the cyclical housing and automotive markets.[1] However, a slowing economy and low consumer demand will cause a total volume drop in shipments that can hurt Old Dominion’s earnings.

Additionally, many customers use a bidding system, which tends to keep prices fairly competitive. For instance, when Wal-Mart Stores (WMT) needs freight shipped, it asks several shipping firms to submit how much payment they are willing to accept. The lowest bid usually wins the contract. When shipping volume decreases in a weakening economy, small competitors bid down prices in order to win loads so that they can cover the cost of their tractors.

Old Dominion’s Costs Are Affected By Fuel Prices

Like most of its competitors in the transportation industry, ODFL determines shipping rates by charging a base rate plus or minus a change in diesel prices. However, this fuel surcharge is not always fully and immediately transferable to the customer.

ODFL’s Business Model Depends on Maintaining its Non-Union Workforce in a Tight Driver Market

The driver market is the tightest it has been in 20 years, with turnover rate exceeding 100% in some large trucking companies[5]. According to the American Trucking Association, the trucking industry will face a national shortage of 111,000 drivers by 2014[5]. This shortage increases the costs of trucking companies like ODFL as they struggle to attract and retain drivers. In addition, Old Dominion's business model revolves around the flexibility of its non-union workforce, which means its employees are free from union regulations restricting work hours and job functions[6]. Compared to competitors with unionized employees, ODFL’s labor force spends less time idle and more time contributing to profitable operations. The company’s ability to sustain this advantage depends on the maintenance of its non-union labor force.

Competition

Old Dominion Freight Line competes with a range of regional and national transportation and logistics companies. ODFL's direct competition is with other less-than-truckload firms who consolidate cargo from several different customers in one trailer-load. Key competitors in this segment include:

ODFL also competes with truckload carriers who contract entire trailers out to one customer. Competitors in this category include:

References

  1. 1.0 1.1 1.2 ODFL 2007 10-K pg. 6  
  2. ODFL 2007 10-K pg. 3  
  3. ODFL 2009 10-K pg. 18  
  4. 5.0 5.1 ERE.net: Truck Driver Slowdown. Retrieved on July 2, 2008.
  5. ODFL 2007 10-K pg. 8  
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