Old Dominion misses second-quarter estimates amid freight recession

July 30 - Old Dominion Freight Line ODFL.O reported second-quarter revenue and profit below Wall Street estimates on Wednesday as it operates through a prolonged freight downturn.

The recessionary phase, which began following the post-pandemic e-commerce boom of 2022, has stretched to its third year and the U.S. trucking industry is grappling with prolonged low volumes and persistent overcapacity, driving rates lower.

Experts predict the freight recession to persist through the second half of the year. Extra capacity is gradually exiting the market as the sector grapples with shifting global macroeconomic environment.

Sluggish growth in domestic industrial production has also hampered results at carriers, according to Old Dominion.

Shares of the Thomasville, North Carolina-based less-than-truckload (LTL) carrier, which caters to companies in the retail, manufacturing, automotive and healthcare sectors, were down 4.4% before the bell.

LTL companies function by carrying multiple shipments from different customers on a single truck, which are then routed through a network of service centers, where they are transferred to other trucks with similar destinations.

The company's operating ratio, a key metric indicating operating expenses as a percentage of revenue, rose to 74.6% from 71.9% a year earlier.

A higher operating ratio reflects an increase in costs, suggesting lower profitability.

The company's total revenue fell 6.1% to $1.41 billion in the quarter. Profit per share dropped about 14% to $1.27.

Analysts on average had expected revenue of $1.42 billion and profit of $1.29 per share, according to data compiled by LSEG.