2023 Q4 Carrier Earnings: Old Dominion

Some things are certain - inevitable - a ‘sure thing’.??

Death. Taxes.?

Old Dominion turning in a stellar OR.

ODFL just released their 4Q23 and full-year 2023 performance metrics at the end of January, and they are indeed stellar!?

Industry-loading profit margins, revenue change that has now turned positive...I mean…

A few times a year in our newsletter, we feature a Carrier Earnings series where we evaluate the financial performance of leading carriers in the industry by analyzing the results they release after each quarter.?

In last week's edition of our Q4 series, we broke down the Earnings reports from Knight-Swift and dissected what we saw; and today’s iteration will dig into the reports from Old Dominion to better understand what’s influencing the achievements or difficulties within their operations!

For more information about carrier performance reporting as it relates to your LTL, click here to connect with someone on our team today.

To catch up on ODFL’s Earnings from Q3 in our most recent report about them, read our latest Old Dominion article here from our Q3 Earnings series by #LetsTalkLogistics!

But enough of all that - let's take a closer look at their results with some thoughts!!

?? Carrier 3: Old Dominion Freight Line?

• ODFL's results reflect the continued softness in both the overall domestic economy and the LTL segment, which were pretty consistent through 2023.??

The forecasted rebound has yet to happen.

• They reported an OR of 71.8… which is 0.6 points worse than their 71.2 OR last year and 1.2 points worse than their 70.6 last quarter.??

But in THIS economy, these margins still represent solid cost control while maintaining strong service.

• When accounting for the benefit of terminal and equipment sales, their Q4 OR was 72.6 in 2023.

Volume Trends, Pricing, and Cost Management

• While revenue in Q4 grew 3.0% over last year, tonnage was down 2.0%. Shipments did grow 1.5% over last year.

On a sequential basis, revenue was down -1.3%, tonnage was down -2.5%, and shipments were down -3.5%.??

• Year over year, revenue per cwt was up a healthy 7.5%. This was supported somewhat by a still-declining weight per shipment, down -3.5% over last year.

Their pricing philosophy is clearly stated:

“[ODFL is] continuously improving the profitability of each customer account through yield increases that are designed to offset our cost of inflation and support further investments in capacity and technology."

• ODFL expects total capital expenditures of $750M in 2024 - very even with the $757.3 they expended in 2023;?

the expected breakdown for 2024 is $350M for real estate, $325M for tractors/trailers, and $75M for technology and other assets.

• ODFL continues upholding their 99% on-time service with a 0.1% claims ratio which both support their yield management initiatives.

• 2 new terminals were opened in 2023, and several others can be opened quickly once demand improves.

They have roughly 30% excess capacity in their network (more than they typically have) but are also prepared to expand quickly if needed.

?? STILL riding the CONFIDENCE HIGH on service offerings

• While their long-term strategic plan is simple, they fully believe that no other carrier has been or will be able to replicate it effectively.

Why? They don't have ODFL's people and culture.?

(Hey Alexa…play their theme song, “The Real Slim O-D” by Old Dominion. #PleaseStandUp #TheOGisOD)

• They expect to gain market share as business improves; again, they have the network capacity for it.

Interestingly, they think that once the economy recovers, capacity in the LTL industry will be constrained again (...even though the remaining LTL carriers are handling today's business largely with Yellow terminals offline).

Seems like this is only likely if we return to the freight levels we saw during COVID.?

ODFL does believe a good amount of former Yellow facilities will leave the industry.

• They expect that the carriers absorbing significant Yellow terminals will have to factor that new cost into their pricing if they want to maintain profits,?

In the long run, this could benefit ODFL…OR the dynamic could change completely if those carriers feel like they need to soften prices to fill their new terminals with freight (in a stagnant economy).

{which leads us to a question we can discuss in the comments: which is more likely to happen @readers?}

ODFL’s Outlook into 2024

• As the economy improves, they expect their peers to raise prices faster than they do since they won’t be able to grow volumes as readily as ODFL due to lack of network capacity.??

This favors ODFL - they can take market share with their available capacity at favorable rates with less price increase than their peers.

• A good amount of volume shifted from LTL to TL post-Yellow, and much of that volume will return to LTL as the market recovers and TL carriers stop looking for the larger LTL loads.

(This is what they believe, at least.)

Interesting to see how ODFL went from being one of the "stalking-horse" bidders attempting to purchase all Yellow terminals in one fell swoop…to not having purchased a single Yellow terminal yet…

Sure looks like they saw a pure real estate play at hand but passed when prices were bid up.

They seem more than satisfied with their network capacity, their terminals in the pipeline, and their positioning for that eventual turn to the economy.

The wild cards here:?

1. how much the economy recovers in 2024, and?
2. how much business that shifted to TL comes back to LTL

Both trends would harbor good news for ODFL, their model, and their available capacity; but if neither comes about in 2024 as other carriers activate their new terminals, we could start seeing some softness with pricing that shifts the market share curve a bit.

?? Coming Up SOON (keep an eye out…)

Don’t hold your breath for the next carrier analysis within our Q4 Earnings series for Saia…

Because it’s coming TODAY as a 2-for-1 treat to you all!?

We’ll take a deeper look at Saia’s performance to wrap up Q4 as an added bonus to today’s edition of #LetsTalkLogistics. Don’t miss it!

Looking to diversify your LTL carrier portfolio? Rising LTL carrier profits like we see here mean it's time to test the field to ensure you're getting a fair rate. Click here to connect with someone on our team today.

This article was collaboratively written by “LTL Observers” - a collective of industry veterans spanning the carrier, shipper, 3PL, and tech provider spaces who are willing to share their opinions.

Disagree with these opinions? We'd love to add you to the line-up to make sure we're including a diverse set of LTL observers. Contact us today.