Old Dominion: Getting Ready For A Recovery (Rating Upgrade)

2025-03-21 04:46:14 ET

Summary

• I update my fair price for Old Dominion to $191 per share, upgrading its rating from Hold to Buy.
• Despite the short-term reversion to the mean after the abnormal growth during the pandemic, fundamentals remain strong.
• Old Dominion keeps gaining market share in a tough environment for the LTL industry.
• Lower capital expenditures for the upcoming years should accelerate buybacks.

Introduction

In my last article on Old Dominion Freight Line ( ODFL ) I reviewed its great management team, the business model, its increasing market share, and the possible implications of Yellow Corp's ( OTC:YELLQ ) bankruptcy. At the time, I assigned a Hold rating due to the demanding valuation.

Since then, the stock has gone nowhere and is currently trading below the fair value of $176.5 per share assigned in November 2023 ($353 before the 2:1 split). In this article, I update my estimated fair value.

As expected, valuation multiples have decreased and margins are reverting to the mean....

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