Shares of less-than-truckload shipper Old Dominion Freight Line (ODFL +2.26%) fell 10.2% through 1:15 p.m. ET today despite largely meeting market expectations for its first-quarter earnings this morning.
Heading into the quarter, analysts had forecast Old Dominion would earn $1.34 per share on sales of $1.47 billion. As it turned out, earnings were $1.34, and revenue only just missed expectations at $1.46 billion. So are investors overreacting here?
NASDAQ: ODFL
Key Data Points
Old Dominion Freight Line's Q1 earnings report
Not necessarily. Expectations for Old Dominion have been running pretty hot, with most analysts agreeing the company will grow earnings at about 23% annually over the next five years. It's this expectation that the stodgy shipping stock will turn out to actually be a growth stock that explains why it has been outperforming the S&P 500 lately, lifting its stock price to nearly 40 times earnings today, up 44% over the last 52 weeks.
But Old Dominion didn't grow anywhere near 23% in the first quarter. Despite mostly meeting expectations, its earnings growth was actually closer to 4%, and its sales grew barely 1%. CEO Marty Freeman called these results "solid," but investors were apparently hoping for more.
Is Old Dominion stock a buy?
They might have to wait a while to get it. Freeman noted that the U.S. economy remains soft and, while he thinks overall demand for its services might be improving, the company still faces operating challenges that could keep growth in check.
Nor did Old Dominion's report provide specific guidance for sales or earnings later this year, to suggest that the hoped-for growth is right around the corner.
So what are investors left with? A stock with a price-to-earnings ratio of 40 that might grow 23% eventually, but actually did just grow earnings 4% instead. Unfortunately, that's not the kind of story that's likely to get this stock growing again anytime soon.
