NEW YORK -- Shares of Old Dominion Freight Line Inc. fell Tuesday, after an analyst for RBC Capital Markets cited a slowdown in certain kinds of shipping and tough earnings comparisons facing the trucking company in cutting his rating for the company to "Sector Perform" from "Outperform."
THE SPARK: John Barnes of RBC said that while Old Dominion has plans to grow its network of shipping terminals, it might be hard for the company to post market share gains in the face of flat or declining industry wide shipping volumes.
Barnes also cut his price target for the Thomasville, N.C.-based company to $30 from $50, to reflect its recent three-for-two stock split.
THE BIG PICTURE: In August, Old Dominion said its second-quarter profit rose 21 percent to $47.8 million, boosted by market share gains and a steep jump in revenue. The profit easily beat Wall Street predictions.
CEO David Congdon attributed the strong quarter in part to improved efficiency in its line-haul, pickup and delivery and platform operations.
Later in the month, the company announced the three-for-two stock split, saying that it would help it attract more investors and improve its liquidity.
THE ANALYSIS: Barnes said the company might fall short of Wall Street's current profit predictions for the rest of this year and 2013, which probably factor in market share gains and growth in freight shipping.
"Furthermore, the carrier is facing difficult year-over-year comparisons (especially the tonnage comparisons) in the quarters to come and unlike the majority of its peers we don't believe Old Dominion has the ability to pull any meaningful cost levers going forward," Barnes wrote in a note to investors.
THE SHARES: Down $1.24, or 4.1 percent, $28.89 in midday trading, after dipping as low as $28.75 earlier in the session. Over the past 52 weeks, the company's shares have traded between $18.27 and $32.87.