Old Dominion Freight Line(NASDAQ: ODFL) is seeing signs of life in the trucking industry, but no indication that demand is recovering at a rapid rate. Investors were disappointed by its latest update, sending Old Dominion shares down 2.9% as of 2:15 p.m. ET.
The "softness" continues
Old Dominion and other transportation companies have been stuck in neutral lately, with the company's stock flat over the last six months. The issue is the economy, or at least the perception that things could turn worse from here. Large manufacturers and other big shipping clients have become more cautious, which has taken a lot of the demand out of the trucking market.
On Tuesday, Old Dominion reported tepid year-over-year growth in February. Revenue per day was up 1.2% for the month compared to 2023. Weight per shipment was down, but it was partially offset by a 0.2% increase in shipments per day.
"Our revenue results turned slightly positive in February but continue to reflect softness in the domestic economy," CEO Marty Freeman said in a statement. "We believe our value proposition is unmatched in the marketplace, which provides us with a tremendous opportunity to win market share and produce strong profitable growth once the macroeconomic environment begins to improve."
Is Old Dominion stock a buy heading into the busy spring shipping season?
The first few months of the year are typically slow for shipping companies as retail companies adjust inventories following the busy holiday season and work around Chinese New Year celebrations. In 2023, Old Dominion incorrectly predicted a recovery in volumes heading into the spring. This year comes with similar hopes, but so far there is no clear sign of acceleration.
This is a cyclical business, and there is only so much even the best-run truckers can do if demand is not there. At least Old Dominion has a proven track record of success to fall back on.
For those with a long enough time horizon, it appears to be a good time to buy into Old Dominion. But understand that the outlook for 2024 is still uncertain, and that there could be some volatility as things evolve in the broader economy.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Old Dominion Freight Line. The Motley Fool has a disclosure policy.
