J.B Hunt Transport sounded the alarm on weakness in the trucking business, and Old Dominion Freight Line (NASDAQ: ODFL) is taking notice. Shares of Old Dominion are down 5% as of 12:30 p.m. ET following J.B. Hunt’s worse-than-expected earnings report.
Reading between the lines after a rival reports
Investors in trucking companies have been on a wild ride in recent years. The pandemic initially wiped out demand, but the e-commerce boom that followed created a significant need for trucks to restock inventories and make deliveries. In 2023, companies saw demand weaken as customers pulled back on expansion due to questions about the economy.
If J.B. Hunt is to be believed, things didn’t improve in the first three months of 2024. On Wednesday, the company reported first-quarter results that fell short of top-line and bottom-line expectations due to soft demand and higher costs.
Each company’s cost structure is different, but the market viewed the commentary regarding demand as a harbinger of things to come for other truckers. Shares of Old Dominion and other truckers, including XPO and Knight-Swift Transportation Holdings, fell in response to J.B. Hunt’s results.
Is Old Dominion Freight Line stock a buy heading into earnings?
We’ll know more on April 24 when Old Dominion is scheduled to release its first-quarter results, but today’s reaction is understandable. Trucking is a cyclical business, so if one big trucker is seeing weak demand, it’s likely an industrywide problem.
Shares of Old Dominion have tripled in the last five years alone. The company has been a long-term winner because it’s among the best-run trucking companies, allowing it to better navigate downturns and beat out competition when pricing is strong.
But after a wave of consolidation and the failure of a few poorer operators, the industry has never been more competitive. Last quarter, for example, other companies delivered results indicating they’re managing through the current environment better than Old Dominion.
Given the uncertain macro climate, investors would be wise to wait to hear from Old Dominion instead of jumping in on this weakness.
Should you invest $1,000 in Old Dominion Freight Line right now?
Before you buy stock in Old Dominion Freight Line, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Old Dominion Freight Line wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $535,597!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
See the 10 stocks »
*Stock Advisor returns as of April 15, 2024
Lou Whiteman has positions in XPO. The Motley Fool has positions in and recommends Old Dominion Freight Line. The Motley Fool recommends XPO and recommends the following options: long January 2026 $195 calls on Old Dominion Freight Line and short January 2026 $200 calls on Old Dominion Freight Line. The Motley Fool has a disclosure policy.
Why Old Dominion Freight Line Stock Is Falling Today was originally published by The Motley Fool
Credit: Source link
