Yahoo Finance Old Dominion Freight Line, Inc. (NASDAQ:ODFL) Q1 2024 Earnings Call Transcript
Old Dominion Freight Line, Inc. (NASDAQ:ODFL) Q1 2024 Earnings Call Transcript April 24, 2024
Old Dominion Freight Line, Inc. beats earnings expectations. Reported EPS is $1.34, expectations were $1.33. ODFL isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, and welcome to the Old Dominion Freight Line First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to hand the call over to Jack Atkins, Director of Investor Relations. Please go ahead.
Jack Atkins: Thank you, Andrea, and good morning, everyone, and welcome to the first quarter 2024 conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through May 1, 2024, by dialing 1 (877) 344-7529, excess code 52-60-631. The replay of the webcast may also be accessed for 30 days at the company's website. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Old Dominion's expected financial and operating performance. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by the important factors, among others, set forth in Old Dominion's filings with the Securities and Exchange Commission and in this morning's news release. And consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. As a final note before we begin, we welcome your questions today that ask that you limit yourselves to one question at a time before returning to the queue.
Thank you for your cooperation. At this time, I would like to turn the conference call over to Mr. Marty Freeman, the company's President and Chief Executive Officer for opening remarks. Marty, please go ahead, sir.
Marty Freeman: Good morning, everyone, and welcome to our first quarter conference call this morning. With me on the call today is Adam Satterfield, our CFO. And after some brief remarks, we will be glad to take your questions. Old Dominion's financial results improved during the first quarter of 2024 despite the continued softness in the domestic economy. While the improvement in our results was modest, we produced year-over-year increases in both revenue and earnings per diluted share for the second straight quarter. Our earnings per diluted share of $1.34 also represents a new company record for the first quarter. To produce these results, our OD family of employees continue to execute on long-term strategic plan that helped create one of the strongest records of growth and profitability in the LTL industry.
This was evidenced by our team's ability to once again deliver 99% on-time service and a 0.1 cargo claims ratio for the first quarter. Consistently delivering superior service at a fair price is the central element of our strategic plan, and we have created a best-in-class value proposition as a result. This value proposition continues to create opportunities for us to win market share over the long term and has also helped strengthen our customer relationships. Our customer retention trends have remained steady over the past 2 years despite a domestic economy that has been sluggish for longer than we originally anticipated. Our customers have had fewer shipments to give us as a result of the slower economic environment, but we are strongly positioned to respond to their needs when demand eventually improves.
Demand can quickly - can very quickly change in the LTL industry and the OD team has experience in dealing with these challenges that rapid growth can present. This is why we focus so intently on our long-term market share initiatives and make decisions to help us achieve these goals despite the cost implications that may impact us in the short term. Our capital expenditure program is a prime example of this as we have invested $757.3 million in total capital expenditures in 2023 and expect to spend approximately $750 million this year to stay ahead of our growth curve. The resulting depreciation has created some short-term cost headwinds that slightly impacted our first quarter operating ratio, but we have improved our fleet and also have approximately 30% excess capacity in our service center network to support future growth.
The LTL industry has seen significant disruption over the past 9 months, but we believe the strategic advantages that we have allowed us to outgrow our industry for decades and will continue. Other carriers may be able to add service centers or purchase more equipment, but what has differentiated us from other carriers is not so easy to duplicate, which is our culture and our OD family spirit. Our people are the most important element of our strategic plan and our entire OD family of employees is committed to a culture of excellence. We invest significantly in our employees to help ensure that we are regularly educating and training our team. We have trained most one third of our current drivers through our internal OD truck driving training program, and we intend to keep using this program to produce safe and qualified drivers.
We also continue to invest in our management and sales training programs, which we believe will help produce the next generation of OD leaders. These are additional examples of decisions that create short-term costs, but are more willing to incur these costs to be prepared for our future. Our consistent investments in our people, our service and our network are the key reasons why we have one more market share than any other carry over the past 10 years. Having each of these elements in place is also why we continue to believe that we are the best positioned company in the LTL industry to benefit from an improving economy. Delivering superior services is ultimately what wins market share in our industry. And I can assure you that everyone on OD's team is more committed than ever to deliver superior service to our customers and ultimately add value to our supply chains.
We also had the financial strength and consistent returns to support investments needed to help achieve our long-term vision for profitable growth. As we continue to execute on a proven plan to achieve this vision, we believe we can drive further improvement in shareholder value. Thank you for joining us this morning. And now Adam will discuss our first quarter financial results in greater detail.
Adam Satterfield: Thank you, Marty, and good morning. Old Dominion's revenue for the first quarter of 2024 was $1.5 billion, which was a 1.2% increase from the prior year. This slight increase in revenue was primarily due to a 4.1% increase in LTL revenue per hundredweight [ph] was partially offset by the 3.2% decrease in LTL tons per day. Our quarterly operating ratio increased 10 basis points to 73.5% as compared to last year, while our earnings per diluted share increased 3.9% to $1.34. On a sequential basis, our revenue per day for the first quarter decreased 7.0% when compared to the fourth quarter of 2023 with LTL tons per day decreasing 5.5% and LTL shipments per day decreasing 5.2%. For comparison, the 10-year average sequential change for these metrics includes a decrease of 1.3% in revenue per day, a decrease of 1.0% in tons per day and a decrease of 0.3% in shipments per day.
The monthly sequential changes in LTL tons per day during the first quarter were as follows: January decreased 3.9% as compared to December, February increased 1.9% from January and March increased 2.4% as compared to February. The 10-year average change for these respective months is an increase of 0.8% in January, an increase of 1.5% in February and an increase of 4.8% in March. Please remember, however, that Good Friday was in March this year, and the average sequential change for March when that is the case, is an increase of 2.5%. While there are still a few work days remaining in April, our month-to-date revenue per day has increased by approximately 5.5% to 6% when compared to April of 2023. Our LTL tonnage per day has increased by approximately 2% to 2.5%, while LTL revenue per hundredweight has increased by approximately 4%.
Our LTL revenue per hundredweight, excluding fuel surcharges, has increased approximately 4.5%, which is trending lower than our growth rate in the first quarter. We want to be clear that the slowdown in this metric does not represent any change in our pricing philosophy or a change in the overall pricing environment. Certain mix changes are impacting this metric in April as the change in our LTL revenue per shipment is more comparable with the first quarter. Nevertheless, we will continue with our long-term consistent approach of targeting yield improvements that exceed our cost inflation and support our capital expenditure program, and we believe we can achieve those initiatives this year. We will provide the actual revenue-related details for April in our first quarter Form 10-Q as usual.
Our operating ratio increased 10 basis points to 73.5% for the first quarter of 2024 as the impact from the increase in our overhead cost more than offset the increase - the improvement rather than our direct costs. Many of our fixed overhead costs increased as a percent of revenue due to the flatness in revenue and the significance of our capital expenditures over the past year. This is most evidenced by the 50 basis point increase in our depreciation cost as a percent of revenue. We were pleased, however, that the improvement in yield and ongoing focus on operating efficiencies helped us improve our direct operating cost as a percent of revenue by approximately 100 basis points. This change included improvements in our operating supplies and expenses that offset a slight increase in salaries, wages and benefits as a percent of revenue.
Our team continued to efficiently manage our variable costs while also delivering best-in-class service standards, which is not easy to do in an environment with lower operating density. We continue to believe that the keys to long-term operating ratio improvement are the combination of density and yield, both of which generally require a favorable macroeconomic environment. Once we have those factors working in our favor again, we are confident in our ability to produce further improvement in our operating ratio and we'll continue to work towards our goal of producing a sub-70% annual operating ratio. Old Dominion's cash flow from operations totaled $423.9 million for the first quarter, while capital expenditures were $119.5 million. We utilized $85.3 million of cash for our share repurchase program during the first quarter, while cash dividends totaled $56.6 million.
Our effective tax rate for the first quarter of 2024 was 25.6% as compared to 25.8% for the first quarter of 2023. We currently anticipate our effective tax rate to be 25.4% for the second quarter. 'This concludes our prepared remarks this morning. Operator, we're happy to open the floor for questions at this time.
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