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Old Dominion (ODFL) Falls 6% in the Past 3 Months: Here's How
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Old Dominion Freight Line, Inc. (ODFL - Free Report) shares have declined 6.2% in the past three months compared with the fall of 2.3% of the industry it belongs to.
Image Source: Zacks Investment Research
Reasons for the Downside
Even though capital expenditures are aimed at driving long-term growth, high capex may hurt the company in the near term. Capex was $225.1 million in 2020, $550.1 million in 2021 and $775.1 million in 2022.
Capital expenditures totaled $234.7 million in first-quarter 2023. For 2023, ODFL anticipates its aggregate capital expenditures to be approximately $700 million. Of the total, $260 million is anticipated to be invested in real estate and service center expansion projects, $365 million in tractors and trailers, and $75 million in information technology and other assets.
The elevated capex may hurt the company's free cash flow generating ability. The truck industry, of which Old Dominion is an integral part, has been persistently battling driver shortage for several years. As old drivers are retiring, trucking companies are finding it difficult to hire new drivers since the job mostly does not appeal to the younger generation.
According to an estimate given by Costello, the United States will face a crisis of 100,000 drivers in five years and a further crunch of 160,000 drivers by 2028. The projection does not bode well for Old Dominion.
Unfavorable Estimates Revision
Due to the above headwinds, the Zacks Consensus Estimate for 2023 earnings have plunged 15.1% to $2.69 per share in the past 60 days.
Zacks Rank and Stocks to Consider
ODFL currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings, S.A. (CPA - Free Report) and Allegiant Travel Company (ALGT - Free Report) .
Copa Holdings, which presently sports a Zacks Rank #1(Strong Buy), is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive. You can see the complete list of today’s Zacks #1 Rank stocks here.
For second-quarter and 2023, CPA’s earnings are expected to register 765.6% and 75.4% growth, respectively, on a year-over-year basis.
Allegiant, currently carrying a Zacks Rank #2 (Buy), also benefits from buoyant air-travel demand. With air-travel demand rising in the United States, operating revenues improved 8.5% year over year in 2022.
Management expects revenues to remain strong in 2023 as well. In first-quarter 2023, operating revenues increased 29.9% on a year-over-year basis. For second-quarter and 2023, ALGT’s earnings are estimated to rise 364.5% and 192%, respectively, on a year-over-year basis.
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Old Dominion (ODFL) Falls 6% in the Past 3 Months: Here's How
Old Dominion Freight Line, Inc. (ODFL - Free Report) shares have declined 6.2% in the past three months compared with the fall of 2.3% of the industry it belongs to.
Image Source: Zacks Investment Research
Reasons for the Downside
Even though capital expenditures are aimed at driving long-term growth, high capex may hurt the company in the near term. Capex was $225.1 million in 2020, $550.1 million in 2021 and $775.1 million in 2022.
Capital expenditures totaled $234.7 million in first-quarter 2023. For 2023, ODFL anticipates its aggregate capital expenditures to be approximately $700 million. Of the total, $260 million is anticipated to be invested in real estate and service center expansion projects, $365 million in tractors and trailers, and $75 million in information technology and other assets.
The elevated capex may hurt the company's free cash flow generating ability.
The truck industry, of which Old Dominion is an integral part, has been persistently battling driver shortage for several years. As old drivers are retiring, trucking companies are finding it difficult to hire new drivers since the job mostly does not appeal to the younger generation.
According to an estimate given by Costello, the United States will face a crisis of 100,000 drivers in five years and a further crunch of 160,000 drivers by 2028. The projection does not bode well for Old Dominion.
Unfavorable Estimates Revision
Due to the above headwinds, the Zacks Consensus Estimate for 2023 earnings have plunged 15.1% to $2.69 per share in the past 60 days.
Zacks Rank and Stocks to Consider
ODFL currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings, S.A. (CPA - Free Report) and Allegiant Travel Company (ALGT - Free Report) .
Copa Holdings, which presently sports a Zacks Rank #1(Strong Buy), is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive. You can see the complete list of today’s Zacks #1 Rank stocks here.
For second-quarter and 2023, CPA’s earnings are expected to register 765.6% and 75.4% growth, respectively, on a year-over-year basis.
Allegiant, currently carrying a Zacks Rank #2 (Buy), also benefits from buoyant air-travel demand. With air-travel demand rising in the United States, operating revenues improved 8.5% year over year in 2022.
Management expects revenues to remain strong in 2023 as well. In first-quarter 2023, operating revenues increased 29.9% on a year-over-year basis. For second-quarter and 2023, ALGT’s earnings are estimated to rise 364.5% and 192%, respectively, on a year-over-year basis.