Goldman Sachs lifts Old Dominion stock rating to Buy

Published 02/06/2025, 09:34
Goldman Sachs lifts Old Dominion stock rating to Buy

On Monday, Goldman Sachs upgraded the stock rating of Old Dominion Freight Line (NASDAQ:ODFL) to Buy from the previous Neutral stance. Accompanying the upgrade, the firm also raised the price target to $200 from $190. The decision came as a result of applying a new target multiple of approximately 33.0x to the unchanged earnings per share (EPS) estimates for the next four quarters, which stand at $6.05. According to InvestingPro data, ODFL currently trades at a P/E ratio of 29.86x, with the stock having declined about 29% over the past six months.

Stifel analysts believe that the adjusted price-to-earnings (P/E) multiple now more accurately reflects Old Dominion’s historical average, considering a standard deviation above the mean over the past five years. This adjustment takes into account the typical expansion of cyclical P/E ratios, as earnings reach a trough before rebounding in anticipation of future growth. The company maintains strong fundamentals, with InvestingPro analysis showing robust financial health, including more cash than debt on its balance sheet and an impressive 27% return on equity.

The new price target of $200, up from the previous target of $190, is based on the revised P/E multiple. The firm maintains its EPS estimates for the upcoming quarters, indicating a steady outlook for the company’s financial performance in the near term.

Goldman Sachs’ analysis suggests that the market will begin to look forward to potential growth for Old Dominion, as it appears earnings are compressing and nearing a bottom. This forward-looking approach is typical as markets anticipate a company’s recovery and subsequent growth phase.

The upgrade and new price target reflect a positive outlook for Old Dominion Freight Line, as the company is expected to experience a cyclical recovery in its earnings, leading to an anticipated uplift in its growth trajectory.

In other recent news, Old Dominion Freight Line reported its first-quarter 2025 earnings, showing an earnings per share (EPS) of $1.19, which exceeded the forecast of $1.16. The company, however, experienced a 5.8% year-over-year decline in revenue, totaling $1.37 billion, slightly below the expected $1.38 billion. Despite these challenges, Old Dominion maintained its market share and demonstrated strong yield management with a 2.2% increase in revenue per hundredweight. Benchmark analyst Christopher Kuhn maintained a Hold rating on Old Dominion, noting the company’s better-than-expected operating ratio but lowering future estimates due to anticipated revenue declines.

BMO Capital Markets also revised its outlook, maintaining a Market Perform rating while reducing the price target from $186 to $175, citing persistent demand challenges. Similarly, Stephens analysts adjusted their price target to $180 from $200 while maintaining an Overweight rating, acknowledging the company’s robust service quality amid demand challenges. In response to market conditions, Old Dominion has reduced its capital expenditures for 2025, deferring some projects and focusing on maintaining service excellence.

The company anticipates a 6% decline in April revenue but expects an improvement in the operating ratio by approximately 100 basis points in the second quarter of 2025. Analysts have highlighted Old Dominion’s strategic advantage in excess capacity, positioning it favorably for market share gains during industry upturns. The company’s pricing strategy remains strong, with management projecting a 5.0%-5.5% year-over-year increase in second-quarter revenue per hundredweight.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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