(Reuters) - Trucking firm Old Dominion Freight Line Inc (ODFL.O) said on Thursday it was expecting robust demand and better pricing in 2018, fueled by a strengthening economy, but its shares slid 6 percent on cost concerns amid a broader selloff.
The positive trucking environment should help the Thomasville, North Carolina-based carrier, which hauls loads from several companies on a single trailer, charge higher prices for the freight it carries due to tightened industry capacity.
“As we enter 2018, we are encouraged by our recent trends that demonstrate continued customer demand for our services and a strong domestic economy,” said Chief Executive Officer David Congdon as the company reported higher-than-expected quarterly results.
Its results included a $9.8 million expense for a bonus paid to non-executive employees, which it attributed to recent changes to U.S. tax law.
The new law required Old Dominion to revalue its net deferred tax liability, resulting in a net tax benefit of $104.9 million, it said.
Credit Suisse analyst Allison Landry said in a research note that Old Dominion’s underlying performance was solid but its operating ratio - a closely watched measure of expenses as a percentage of revenue - was worse than forecast, primarily due to higher costs, including fuel, and the one-time bonus.
Part of the drop could also be linked to a broader selloff in transport stocks on Thursday, “which isn’t unreasonable given currently high valuation multiples across the industry,” said Morningstar analyst Matthew Young.
Shares in trucking firm YRC Worldwide Inc (YRCW.O) were down more than 4 percent, while XPO Logistics (XPO.N), a global trucking and warehousing company, was down 3 percent despite reporting a higher-than-expected quarterly profit.
Even as strong demand and tight capacity help revenue growth, carriers face the challenge of recruiting and retaining qualified drivers amid low U.S. unemployment as they strive to keep pay, a huge expense, as low as possible.
Old Dominion said its employee benefit costs were expected to climb this year due to increases to paid-time-off and larger 401(k) matching contributions.
It expects 2018 capital expenditure of about $510 million, including $200 million for real estate and facility expansion projects, $265 million for tractors and trailers, and $45 million for technology and other assets.
Old Dominion, which also runs warehouses and brokerage services in North America, reported fourth-quarter profit of $197.25 million, or $2.39 per diluted share, compared with $68.51 million, or 83 cents a diluted share a year earlier, and quarterly revenue of $891.1 million.
Those results surpassed Wall Street analyst expectations of $1.12 per share and $878.5 million in quarterly revenue.
Reporting by Eric M. Johnson in Seattle; Editing by Bernadette Baum