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Old Dominion Freight Line Beat 4Q17 Earnings Estimates

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Part 4
Old Dominion Freight Line Beat 4Q17 Earnings Estimates PART 4 OF 4

Most Analysts Have a ‘Hold’ View on Old Dominion

Analysts’ recommendations

Old Dominion Freight Line (ODFL) has a consensus rating of 2.73 from analysts polled by Thomson Reuters. The rating indicates an overall “hold” opinion on the stock. Of the 15 analysts, eight analysts (53.3%) have a “hold” rating, five analysts (33.4%) have a “buy” rating, and two analysts (13.3%) have a  “sell” rating on Old Dominion stock.

Most Analysts Have a &#8216;Hold&#8217; View on Old Dominion

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Analysts’ target price

The analysts surveyed by Thomson Reuters have a 12-month consensus target price of $139.0 on Old Dominion stock. Based on the closing price of $135.60 on February 13, 2018, it represents a return potential of 2.5% in the next year. Last year, Old Dominion stock made shareowners wealthier by 46.9%. We’ll compare Old Dominion’s target price with analysts’ target price estimates for the peer group:

  • YRC Worldwide (YRCW) – $19.0 with a return potential of 87.0%.
  • XPO Logistics (XPO) – $104.1 with a return potential of 12.8%.
  • SAIA (SAIA) – $73.3 with a return potential of 2.6%.
  • ArcBest (ARCB) – $36.7 with a return potential of 11.5%

Should we consider analysts’ take on Old Dominion?

With the Tax Cuts and Jobs Act of 2017 in force, many companies in the transportation (XLI) sector are expected to gain in terms of higher net earnings and free cash flows. The companies should have a higher raising capital expenditure and/or increased stock buybacks and/or higher capital expenditure in 2018.

Going through Old Dominion’s 4Q17 earnings call transcript, we noted three main aspects. First, the company paid a special bonus of $9.8 million in 4Q17 as a result of the new tax code. Second, Old Dominion raised its quarterly cash dividend 30% to $0.13 to be paid in 1Q18. The increase was higher than what the markets expected. Third, the company’s capex budget for 2018 rose 34%, which explains the confident business outlook going ahead.

Old Dominion’s tax saving found a way through all of the possible channels with capital investment getting the most attention. Considering Old Dominion’s relatively superior top line and operating growth in recent quarters, the stock is set for an upward trend.

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