Old Dominion Earnings: Retail Destocking and Softening Industrial Sector Hit Tonnage

Top-tier less-than-truckload specialist Old Dominion's top line swung negative, falling 4% year over year (it was still up 6% in the fourth quarter). Revenue came in slightly shy of our forecast due to a greater-than-expected tonnage declines, though yields outperformed modestly. Tonnage declines accelerated in the quarter, falling 12% year over year compared with a 9% contraction last quarter and a 3% fall in the third quarter. Total core yield (revenue per hundredweight excluding fuel) expanded 9%, similar to the fourth-quarter increase. In short, retail-sector restocking has retrenched on elevated inventories, and industrial end markets started softening by the end of 2022, pressuring volumes across the LTL industry following an exceptionally robust growth phase. That said, the current trucking backdrop is not unexpected and we've already been baking in a pullback in 2023.