Old Dominion 2nd quarter profits spike

Old Dominion 2nd quarter profits spike    Old Dominion Freight Line on Thursday said its second quarter net income grew 83.1 percent to $39.4 million, on revenue growth of 30.4 percent to $480.3 million.
   For the first six months of 2011, revenue was $902.9 million, a 31.6 percent increase, while net income rose 108.7 percent to $61 million. The company didn't release operating income figures.
   'Old Dominion's second quarter performance shattered our prior records for quarterly performance,' said David Congdon, the company's president and chief executive officer. 'Quarterly revenue increased 15 percent over our previous high of $417.8 million in the second quarter of 2008. We believe our operating and financial results further validate the effectiveness of our operating and growth strategies.'
   Excluding fuel surcharges, Old Dominion's revenue grew 8.1 percent in the second quarter. Weight per shipment declined 2.3 percent, while average length of haul increase 1.5 percent, aiding yield in the quarter. Shipments increased 16.8 percent.
   'Due to our historical and substantial growth, our market share has reached the mid-single digits,' Congdon said. 'As a result, we have an excellent opportunity to further increase our market share by expanding our business organically through increased density within our existing service center network, as well as through additional geographic expansion.
   'In addition, continued investments in technology represent an ongoing opportunity to enhance productivity and provide better, more transparent services to our customers. We are also continuing to invest in value-added logistics services that include warehousing, truckload brokerage, dedicated fleet and transportation management. Although currently a small, yet rapidly growing, portion of our business, these value-added services are building new revenue streams for Old Dominion that we believe will allow us to better leverage our service center network and our thousands of customer relationships in the U.S. and abroad.'
   Analyst Stifel Nicolaus Transportation & Logistics Research Group said in a research note that Old Dominion is well-placed to grow its market share in the next few years.
   'As the only public asset-based (less-than-truckload) carrier with margins that justify reinvestment, we had expected (and still expect) Old Dominion to take market share for the next few years under the pricing umbrella created by the other carriers that need price to maintain operations,' the note said. 'In 2Q11, the company exceeded both our tonnage and yield growth estimates, increasing tonnage (up 14 percent) and yields (up 14.2 percent) ahead of industry average, leading to a record operating ratio of 86.5 percent.'
   Stifel Nicolaus added Old Dominion has been able to move into the premium service segment of the LTL industry.
   'The company used its network improvements along with the recent market disruptions and aggressive competitor pricing actions (and related service problems) to elevate itself to premier service status in the industry,' the note said. 'FedEx and Con-way used to enjoy this position, but seriously injured themselves with the 2009-2010 price war, which saw their premium price vanish, while clogging their networks, negatively impacting service.
   'Old Dominion’s margin gap versus peers is real and sustainable, in our view. First, the company has a better understanding of its costs. Second, management uses this knowledge to appropriately price its freight and then is disciplined at monitoring changes in costs (and customer freight) to make sure it is getting a fair price for what it is hauling. Also, the continued investments the company made through the downturn while its competitors were cutting investment helped improve service, which attracted and kept more customers and added to density.'