Investing

Can Old Dominion Freight Lines (ODFL) Double Under a Trump Presidency?

Rich Duprey

Published: November 8, 2024 11:30 am

Donald Trump’s decisive victory in the presidential race is causing a dramatic response in the stock market as investors sort out the election winners and losers. One surprising winner is the trucking industry, which is seeing many stocks jumping by double-digit percentages.

One of the biggest gainers in midday trading is Old Dominion Freight Line (NASDAQ:ODFL), the country’s second-largest less-than-truckload (LTL) carrier by revenue. ODFL stock is up 11% and could go higher in the months ahead.

With Trump promising higher tariffs on imported goods, companies are frontloading their orders to bring in shipments ahead of any increase. It bodes well for some brisk business and could boost Old Dominion’s shares. But as that would be a short-term gain is there a chance ODFL could actually double?

24/7 Wall St. Insights:

• The trucking industry looks like a surprise beneficiary of a Donald Trump presidency and sector stocks are rising by double-digit percentages in the wake of his election.
• Old Dominion Freight Lines (ODFL) is one of the biggest gainers and largest in the industry, that has been an outstanding investment for the past decade.
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Boosting domestic production

Old Dominion produced almost $6.2 billion in revenue last year and through the first nine months of 2024, revenue is up 1.3% to $4.4 billion. The burst of greater shipments from retailers trying to get ahead of any tariff hikes could see the trucker’s revenue surge over the next few quarters.

Trump wants to raise tariffs on imports 10% to 20%, but on products from China, he has called for tariffs as high as 60%. While that could hurt shipping companies, it could benefit domestically produced goods, which could see a need for more trucking.

There are other tailwinds for truckers in Trump’s policies, too. The primary focus of Trump’s policies is to encourage domestic investment, hence the call for higher rates on imports. But the president is also calling for significant changes to tax policy. He plans to lower corporate tax rates from their current level of 21% to as low as 15% for companies that make their products in the U.S. 

Not only would that bolster Old Dominion’s earnings, helping to boost its share price, but it would further incentivize business to produce locally. The greater the amount of made in America goods there are, the better for the trucking industry.

Opening the road for truckers

Another cornerstone of Trump’s policies is reducing onerous regulation on business. To that end, Sen. J.D. Vance, who will serve as vice president under Trump, is a co-sponsor on two important pieces of trucking legislation: the Truck Parking Safety Improvement Act and the DRIVE Act.

Under existing regulations of the Federal Motor Carrier Safety Administration (FMCSA), truckers are required to find a “safe” place to park their trucks. Industry site Freightwaves reports truckers spend about one hour a day looking for such spaces. Reforming the regulation could save trucking companies significant sums on their costs.

The DRIVE Act, on the other hand, would prohibit the FMCSA from requiring vehicles over 26,000 pounds engaged in interstate commerce to be equipped with speed-limiting devices set to a maximum speed. 

Coupled with other deregulatory efforts, the trucking industry and Old Dominion should see costs lowered and profits increased.

Expect ODFL stock to keep on trucking

When looked at as a whole, a Trump administration ought to provide a big lift to truckers. Even under the current regulatory and tax framework, Old Dominion Freight Line has been an excellent investment. It has returned 872% to investors over the past decade compared to a 243% return for the S&P 500. 

A Trump presidency bodes well for ODFL stock doubling from here.