UPDATE 3-Old Dominion Freight Line Q2 beats Street, shares rise

Wed Jul 28, 2010 2:07pm EDT

* Q2 EPS $0.58 vs est. $0.46

* Revenue $368.3 mln vs est. $359.2 mln

* Tonnage grows about 13 pct

* Shares hit lifetime high (Adds analyst comments, updates share movement)

By Megha Mandavia

BANGALORE, July 28 (Reuters) - Motor carrier services provider Old Dominion Freight Line Inc (ODFL.O) posted better-than-expected quarterly results, helped by strong pricing, driving the company's shares to their lifetime high.

The company, which caters to the less-than-truckload (LTL) space, said it expects tonnage to increase in a range of 15 percent to 20 percent for the third quarter.

Tonnage growth is in part attributable to the slowly improving economic conditions, Executive Chairman Earl Congdon said on a conference call with analysts.

The freight market, which was in recession for about three years, is showing signs of recovery. Excess capacity had put pressure on pricing and dented margins at truckers as well as freight brokers. [ID:nSGE66K0L4]

However, Chief Executive David Congdon said the company remained uncertain about the strength and sustainability of the economic recovery, as well as the potential impact from regulatory changes affecting, among other issues, healthcare, energy, labor and taxes.

BETTER PRICING

"We believe industry pricing should grow faster than industry tonnage for the next couple of years, which should leave Old Dominion in a great position to take market share, Stifel Nicolaus analyst David Ross said in a note to clients.

Ross, who upgraded the company to "buy" from "hold," said the company never participated in the aggressive pricing seen in 2009 and has therefore been able to offer more stable rates than the competition and add volume to its network as industry tonnage has grown.

David Campbell of Thompson, Davis, & Co said the company was using up excess capacity, therefore its fixed costs were being absorbed by the increase in tonnage and revenue.

Campbell, who thinks the amount of capacity in the industry has come down, said the company's pricing was one of the factors doing well for it.

Analyst Jason Seidl of Dahlman Rose & Co said the customers who had walked away from Old Dominion would come back as the competitors who had cut prices aggressively would increase them again.

"Some of these carriers who were heavily discounted last year are kind of waking up and realising that continuing to post terrible results is not really the good way of going," Seidl said.

STRONG Q2 RESULTS

For the second quarter, the company reported a net income of $21.5 million, or 58 cents a share, compared with $10.7 million, or 29 cents a share, a year earlier.

Revenue rose about 16.5 percent to $368.3 million. Tonnage grew about 13 percent, driven by about 7 percent increase in shipments and 6 percent increase in weight per shipment.

Analysts on average were expecting earnings of 46 cents a share on revenue of $359.2 million, according to Thomson Reuters I/B/E/S.

Shares of the company rose as much as 8 percent to $40.94.

They were trading up 6 percent at $40.14 Wednesday afternoon on Nasdaq. (Reporting by Megha Mandavia in Bangalore; Editing by Vyas Mohan, Roshni Menon)

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