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Old Dominions (ODFL) Gains From Strength in Liquidity Position

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We recently issued an updated report on Old Dominion Freight Line, Inc. (ODFL - Free Report) .

Old Dominion’s liquidity position is impressive.  The company exited the first quarter with cash and cash equivalents of $357 million, way above the current debt of $45 million. This indicates that the company has sufficient cash to meet its current debt obligations.

Moreover, efforts to reward shareholders through dividends and share buybacks are also impressive. In May, Old Dominion Freight board approved a quarterly cash dividend of 15 cents per share. The dividend reflects a three-for-two stock split, approved by the board on Feb 21. This means that one additional share was issued for every two shares of common stock. The additional shares were distributed on Mar 24 at an adjusted price of $150.48.

In first quarter 2020, the company rewarded its shareholders with $196.6 million in first-quarter 2020 through buybacks ($178.3 million) and dividends ($18.3 million).

Nevertheless, sluggish freight environment due to COVID -19 issues is a major concern for Old Dominion. The adversity is due to lower volumes on account of soft freight demand. In first-quarter 2020, LTL tonnage declined 2.4%. The impact is likely to magnify in second-quarter 2020 as supply chain disruptions aggravate. This will dent the company's growth prospects.

Zacks Rank & Key Picks

Old Dominion currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Transportation sector are Canadian Pacific Railway Limited (CP - Free Report) , TFI International (TFII - Free Report) and Teekay Tankers Ltd. (TNK - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings (three to five years) growth rate for Canadian Pacific, TFI International and Teekay Tankers is estimated at 7.5%, 4.1% and 3%, respectively

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