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Old Dominion (ODFL) Shares Up 54.1% in Past Year: Here's Why

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Old Dominion Freight Line, Inc. (ODFL - Free Report) shares have surged 54.1% in the past year compared with the industry’s 44.1% increase.

Zacks Investment ResearchImage Source: Zacks Investment Research

Reasons for Surge

Old Dominion's efforts to reduce debt levels are quite encouraging. The company's total debt was around $250 million in 2008. This has been lowered to $99.94 million at the end of first-quarter 2021. Additionally, the company’s cash and cash equivalents at the end of the first quarter stood at $351.9 million, way above the debt load. Moreover, its current ratio (a measure of liquidity) increased to 2.38 at the end of the first quarter from 1.94 in the year-ago period. A high current ratio indicates that a company is able to meet short-term obligations.

Additionally, the company reported improvement in operating ratio of 2020. At the end of 2020, the metric stood at 77.4% compared with 80.1% at the end of 2019. Notably, lower the value of this metric the better. Continuing the trend, operating ratio improved 530 basis points to 76.1% in first-quarter 2021. The metric is likely to improve in the June quarter too, owing to higher revenues. Notably, improvement in freight conditions is a huge positive for the company.

Favorable Estimate Revisions

Driven by the above tailwinds, the Zacks Consensus Estimate for current-year earnings has increased 8.6% to $7.90 per share in the past 60 days.

Zacks Rank & Other Stocks to Consider

Old Dominion currently carries a Zacks Rank #2 (Buy).

Investors interested in the broader Zacks Transportation sector can also consider stocks like Landstar System, Inc. (LSTR - Free Report) , Triton International Limited and Herc Holdings Inc. (HRI - Free Report) . Herc Holdings sport a Zacks Rank #1 (Strong Buy), while Triton and Landstar carries a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term (three to five years) expected earnings per share growth rate for Landstar, Triton and Herc Holdings is projected at 12%, 10% and 42.9%, respectively.

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