Baird changed its rating on Old Dominion Freight Line from Neutral to Underperform on Thursday, even as the firm raised its price target to $204 from $166. The stock was trading at $208.54, a hair below its 52-week high of $209.61, and technical indicators flagged the shares as overbought.
The downgrade follows Old Dominion’s fourth-quarter 2025 earnings release, which showed earnings per share of $1.09. That result topped Baird’s internal estimate of $1.05 and the consensus on the Street of $1.06. Despite the EPS beat, the company’s valuation sits at a price-to-earnings ratio of 39.21, reflecting a high multiple relative to reported results.
Revenue performance contrasted sharply with the modest upside in EPS. The company disclosed a 5.7% year-over-year decline in revenue. Underlying volume measures were weaker: tons per day fell 10.7% versus the prior year. At the same time, revenue per hundredweight excluding fuel surcharges climbed 5.6%, indicating some pricing strength on a per-unit basis but not enough to offset lower volumes.
Profitability metrics also showed pressure. The operating ratio deteriorated by roughly 80 basis points, moving from 75.9% to 76.7%. Baird highlighted increases in expense ratios that accompanied the softer volumes: selling, general and administrative costs expanded by about 180 basis points year-over-year to 49.1% of total revenue, while depreciation and amortization rose to 7.1% of revenue from 6.4%.
In its write-up, Baird clarified that the change in recommendation was driven solely by valuation considerations. The firm did not question Old Dominion’s operational capabilities, culture, or management execution in arriving at the Underperform rating. Additional market data point to a stretched valuation profile, with the firm trading materially above its assessed Fair Value and carrying an elevated enterprise-value-to-EBITDA multiple of 25.25.
Investors also reacted to a sizable revenue miss on the quarter. Reported revenue was $307 million versus a forecast of $1.3 billion, a gap that intensified market scrutiny despite the EPS beat. The revenue shortfall, combined with volume declines and a widening cost structure, underpins the cautious stance from Baird.
Overall, the combination of near-term volume weakness, expanding overhead as a share of revenue, and high market multiples informed the analyst view that downside risk to the equity exists at current prices. Market participants will be watching whether pricing gains per hundredweight can sustain margins as tonnage remains under pressure.