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Old Dominion (ODFL) Stock Hits 52-Week High: What's Aiding It?

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Shares of Old Dominion Freight Line (ODFL - Free Report) hit a 52-week high of $292.57 during the course of the trading session on Aug 27, before retracing a bit to close the session at $289.78. In fact, this Thomasville, NC-based player has performed very well year to date. The stock has rallied 48.5%, comfortably outperforming its industry’s growth of 34.3%.

Zacks Investment Research
Image Source: Zacks Investment Research

Let’s delve deep to unearth the reasons for this impressive price performance.

Old Dominion Freight Line’s efforts to reward its shareholders through dividends and share buybacks even in the current uncertain scenario are impressive. During 2020, the company returned shareholders’ funds to the tune of $435.1 million.

In the first half of 2021, it shared profits worth $46.4 million through cash dividends and $349 million via buybacks. In July, the board of directors approved a new share buyback program authorizing to repurchase up to $2 billion of its outstanding stock.

Improvement in the operating ratio (operating expenses as a percentage of revenues) is encouraging. At the end of 2020, the metric stood at 77.4% compared with 80.1% at the end of 2019. Lower the value of this metric the better. With freight conditions bettering, the top-line picture is getting rosier. This combined with low costs is boosting the ratio further. The ratio came in at 74% in first-half 2021, better than 79.7% in first-half 2020.

Old Dominion Freight Line's efforts to reduce its debt levels are quite encouraging. The company's total debt was around $250 million in 2008. This has been lowered gradually to $99.94 million at the end of second-quarter 2021.

Estimate Revisions

Upward estimate revisions raise optimism for a stock’s prospects. Old Dominion Freight Line scores impressively on this front. The Zacks Consensus Estimate for the third-quarter 2021 earnings has moved 11.5% north over the past 60 days to $2.33 per share. The same has increased 7.1% to $8.46 per share for the full year in the same time span.

Additionally, the company’s trailing 12-month return on equity (ROE) supports its growth potential. The company’s ROE of 26.3% also compares favorably with its industry’s ROE of 16.1%.

Zacks Rank & Key Picks

Old Dominion Freight Line currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Zacks  Transportation  sector are  Knight-Swift Transportation Holdings Inc. (KNX - Free Report) , Landstar System, Inc. (LSTR - Free Report)  and  Herc Holdings Inc. (HRI - Free Report) . Knight-Swift and Landstar carry a Zacks Rank #2 (Buy) while Herc Holdings sports a Zacks Rank #1 (Strong Buy) at present. You can see  the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected earnings per share (three to five years) growth rate for Knight-Swift, Landstar and Herc Holdings is pegged at 15%, 12% and 49.2%, respectively.