Editor’s note: This column is part of our Best Stocks for 2015 contest. Mike Turner’s pick for the contest is Old Dominion Freight Line Inc. (ODFL).
In December, I predicted that domestic companies would benefit from plummeting oil prices, and that Old Dominion Freight Line (NASDAQ:ODFL) would benefit from saving on fuel costs.
So far, domestic companies have benefited greatly from the oil price decline and a strengthening U.S. dollar. However, market momentum has been stop-and-go, and oil prices have moved slightly higher since the beginning of 2015.
ODFL stock, in particular, has fluctuated, dropping nearly $6 in January. The stock rebounded in February after releasing better-than-expected earnings and has been steadily edging higher ever since. Currently, ODFL stock is trading near my initial recommended entry price.
Now, this many cause concern for some, but I expect Old Dominion’s share prices to move higher soon, and here’s why: Old Dominion shares tend to trend higher as the company grows.
In the fourth quarter, Old Dominion reported a revenue increase of 22% to $721 million, while net income soared 48% to $70 million, outperforming analysts’ estimates. Operating income grew 46% for the quarter and increased more than 20% for fiscal year 2014.
ODFL Stock Outlook
For the first quarter, ODFL stock is expected to report EPS of 71 cents per share on revenue of $708 million, which translates to 34% annual earnings growth and 14% annual sales growth.
ODFL also remains highly-ranked, as it is the 32nd top-rated stock in the Turner Analytics system, with a very high technical score (94 out of 100) and fundamental score (80 out of 100). ODFL is also a sector leader, favoring a bullish trend.
And while oil prices are slightly higher, I don’t expect this to negatively impact the company because, in January, Old Dominion just raised the rates it charges, which should offset any increase in energy costs.
The stock is also up more than 130% in the past three years, so, it’s not unusual to see ODFL’s stock price fluctuate on a day-to-day basis. Historically it has moved higher in the long term, which is the important thing for investors.
The company is also in the midst of its $200-million stock repurchase program and has already bought back $5.5 million worth of ODFL stock in the fourth quarter. This will continue to serve as a floor to any temporary downside move in its stock price.
So, the bottom line is this: According to the data, ODFL is a solid long-term investment.
Mike Turner and his team of software engineers developed Turner Analytics, a sophisticated software system that creates time-cycle forecasting charts. He is also the editor of Signal Investor.
