Best Stocks for 2015: ODFL Hits Volatile Patch, Maintains Fundamentals

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).

We’re halfway through the year, and while the stock market has favored a bull bias, it has been a volatile six months. The strong U.S. dollar hindered international sales and earnings, with the S&P 500’s earnings only growing at a 0.7% rate.

10BEST2015_185x185Second-quarter projections aren’t looking much better; analysts estimate that S&P 500 earnings will have dropped 4.7% over the past year.

Along with weakening sales and earnings, rising crude oil prices also affected the U.S. markets during the first half of the year. While oil inventories remain high, prices have gone up with seasonal demand. Recently, crude oil prices are back above $60 per barrel.

Unfortunately, the combination of a volatile market and higher oil prices has hurt Old Dominion Freight Line, Inc. (ODFL) stock. And as a result, ODFL stock has not trended as expected this year. When I recommended picking up shares in late December, oil was trading much lower and looked to be heading lower. However, the opposite happened. As a result, Old Dominion and the whole trucking industry have headed in a general downward direction so far this year.

ODFL Stock Isn’t Giving Up

The good news, though, is that ODFL is starting to flatten out and shares should start to move higher again. This is especially true when you consider the company has strong growth estimates for the second quarter: Analysts estimate earnings of 99 cents per share on revenue of $771 million. That’s a 15% year-over-year increase in EPS. In addition, Old Dominion increased its growth estimates in LTL (Less Than Truck Load) tons per day from 9%-10% to 9.5%-10%.

Fundamentally, ODFL is still a strongly rated stock in the Turner Analytics database. The company’s quarter-to-quarter revenue growth, quarter-to-quarter earnings growth, year-to-year earnings growth, and multi-year earnings growth all earn a 5 out of 5 score. So, while the stock had a rough start to the year, I expect shares to bounce back soon.

As I mentioned in the previous update, ODFL stock is up more than 130% in the past three years, so, it’s not unusual to see the stock’s price fluctuate on a day-to-day basis. ODFL has a 52-week high of $81.48 and low of $61.17. 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. These buybacks will continue to serve as a floor to any temporary downside move in its stock price. I expect the trade will get near our trend line once it reaches about $74. So the best course of action is to hold ODFL stock until the data makes a more definitive move.

Mike Turner and his team of software engineers developed Turner Analytics, a sophisticated software market and trade-timing system that provides unbiased, quantifiable recommendations on thousands of equities and rates, ranks and scores these equities from best to worst in an easy-to-use on-line tool for individual investors. He is also the editor of Signal Investor.

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