Old Dominion Freight Line (ODFL)

Freight carrier Old Dominion (NASDAQ:ODFL) met Wall Streets revenue expectations in Q3 CY2025, but sales fell by 4.3% year on year to $1.41 billion. Its GAAP profit of $1.28 per share was 5.2% above analysts’ consensus estimates.

Company Overview

With its name deriving from the Commonwealth of Virginia’s nickname, Old Dominion (NASDAQ:ODFL) delivers less-than-truckload (LTL) and full-container load freight.

The growth of e-commerce and global trade continues to drive demand for shipping services, especially last-mile delivery, presenting opportunities for ground transportation companies. The industry continues to invest in data, analytics, and autonomous fleets to optimize efficiency and find the most cost-effective routes. Despite the essential services this industry provides, ground transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.

Competitors offering similar products include J.B. Hunt (NASDAQ:JBHT), Saia (NASDAQ:SAIA), and XPO (NYSE:XPO).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Old Dominion Freight Line’s sales grew at a mediocre 7.1% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Old Dominion Freight Line’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 2.5% annually. Old Dominion Freight Line isn’t alone in its struggles as the Ground Transportation industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

We can dig further into the company’s revenue dynamics by analyzing its number of units sold, which reached 2.83 million in the latest quarter. Over the last two years, Old Dominion Freight Line’s units sold averaged 3.2% year-on-year declines. Because this number is in line with its revenue growth, we can see the company kept its prices fairly consistent.

This quarter, Old Dominion Freight Line reported a rather uninspiring 4.3% year-on-year revenue decline to $1.41 billion of revenue, in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 2.9% over the next 12 months. While this projection indicates its newer products and services will catalyze better top-line performance, it is still below the sector average.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Old Dominion Freight Line’s unit economics are great compared to the broader industrials sector and signal that it enjoys product differentiation through quality or brand. As you can see below, it averaged an excellent 39.4% gross margin over the last five years. That means Old Dominion Freight Line only paid its suppliers $60.63 for every $100 in revenue.

This quarter, Old Dominion Freight Line’s gross profit margin was 39.9%, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Old Dominion Freight Line’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 27.1% over the last five years. This profitability was elite for an industrials business thanks to its efficient cost structure and economies of scale. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Old Dominion Freight Line’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. We like to see margin expansion, but we’re still happy with Old Dominion Freight Line’s performance, especially when considering the cycle turned in the wrong direction and most peers observed plummeting revenue and margins.

In Q3, Old Dominion Freight Line generated an operating margin profit margin of 25.7%, down 1.7 percentage points year on year. Since Old Dominion Freight Line’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Old Dominion Freight Line’s EPS grew at a remarkable 13.5% compounded annual growth rate over the last five years, higher than its 7.1% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

Diving into Old Dominion Freight Line’s quality of earnings can give us a better understanding of its performance. A five-year view shows that Old Dominion Freight Line has repurchased its stock, shrinking its share count by 10.6%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Old Dominion Freight Line, its two-year annual EPS declines of 6% mark a reversal from its (seemingly) healthy five-year trend. We hope Old Dominion Freight Line can return to earnings growth in the future.

In Q3, Old Dominion Freight Line reported EPS of $1.28, down from $1.43 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 5.2%. Over the next 12 months, Wall Street expects Old Dominion Freight Line’s full-year EPS of $4.97 to grow 2.3%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Old Dominion Freight Line has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 14.5% over the last five years.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Old Dominion Freight Line hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 32.9%, splendid for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Old Dominion Freight Line’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Old Dominion Freight Line reported $46.59 million of cash and $84.99 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.75 billion of EBITDA over the last 12 months, we view Old Dominion Freight Line’s 0.0× net-debt-to-EBITDA ratio as safe. We also see its $3.66 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Old Dominion Freight Line beat analysts’ EBITDA expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 4.8% to $142.51 immediately following the results.

Updated: December 4, 2025 at 9:04 PM EST

Before investing in or passing on Old Dominion Freight Line, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Old Dominion Freight Line’s business quality ultimately falls short of our standards. For starters, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its impressive operating margins show it has a highly efficient business model, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its projected EPS for the next year is lacking.

Old Dominion Freight Line’s P/E ratio based on the next 12 months is 31x. At this valuation, there’s a lot of good news priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $155.46 on the company (compared to the current share price of $153.67).