ODFL - Embedded Expectations Analysis - 2020 07 02
Old Dominion Freight Line, Inc. (ODFL:USA) currently trades above historical averagesrelative to UAFRS-based (Uniform) earnings, with a 33.2x Uniform P/E. At these levels,
the market has bullish expectations for the firm, but management may be concerned
about the pace of the economy recovery, volume declines, and capex spending
Specifically, management may lack confidence in their ability to see normalized business levels once the economy reopens and expand capacity in high-growth metro markets. Furthermore, they may have concerns about the impact of increases in the average length of haul and weight per shipment on revenue, sharp April revenue declines, and their ability to reduce maintenance capex. Additionally, they may lack confidence in their ability to sustain retail-related business growth and drive network volume recovery, and they may be overstating the strength and resiliency of the less-than-load (LTL) industry. Finally, they may be concerned about the impact of mom-and-pop store closures on their volume, their investments in customer service, and changes in retail supply chains driven by e-commerce adoption
Old Dominion Freight Line is a less-than-truckload (LTL) motor carrier providing regional, inter-regional and national LTL services, which include expedited transportation. In addition to the company's primary LTL services, the company provides a range of services including container drayage, truckload brokerage and supply chain consulting. The company also provides access to its systems through multiple gateways that provide its customers and employees flexibility and access to information. The company employs vehicle safety systems, on-board and hand-held computer systems, freight handling systems and logistics technology to reduce costs and transit times.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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