Old Dominion Freight Line Inc. has returned to a stock strategy that demonstrates its financial and industry prowess.

The Thomasville trucking company’s board of directors announced Friday plans to conduct a three-for-two stock split, effective March 24 for shareholders registered as of March 10.

The share price opened trading Friday at $225.72, just off its 52-week and historic high of $227.21. The share price closed down 1.4%, or by $3.05, to $222.67.

By comparison, its 52-week share price low is $130.87.

A three-for-two split at Friday’s opening price would reduce the shares to $151.23.

Analysts say stock splits that produce more shares typically represent a company’s vote of confidence in future revenues.

The decision runs counter to the waves of corporations — including Old Dominion — buying back their stock to have fewer outstanding shares in the marketplace, thus potentially driving up the share price and enhancing shareholder value.

Old Dominion will go from 79.82 million outstanding shares to about 119.5 million.

The company said Feb. 6 that it spent $241 million on share repurchases during fiscal 2019.

It will be the company’s sixth such stock split since 2003, but the first since September 2012. The other three-for-two stock splits occurred in August 2010, November 2005, May 2004 and June 2003.

Since the September 2012 stock split, the share price has climbed more than sevenfold from $30.55. From the first stock split in June 2003, it has climbed about 30 times from $7.50.

Shareholders, as in the five previous splits, will be issued a certificate representing one additional share of common stock for every two shares of common stock they hold.

For shareholders holding fractional shares of Old Dominion, they will receive a cash payment based on the average of the high and low sales prices of the common stock on the record date.

The company declined to comment when asked about the timing of the stock split and the reasoning behind it.

“Splitting stock in order to reduce share price might attract some individual buyers, but the impact is negligible,” said Bowman Gray IV, a local independent stock broker.

“Keeping a high stock price doesn’t necessarily reduce volatility, Tesla, Google and Amazon have share prices that are far higher and have daily swings that can be two to three time more dramatic than anything else.

“The increase in outstanding shares can improve liquidity and has a big psychological impact, but does not have an impact on valuation,” Gray said.

Old Dominion is a top-10 U.S. less-than-truckload carrier. Continuing upswing in profits has been fueled by internal growth and market-share gains.

The company reported Feb. 6 having fiscal 2019 revenue of a record $4.11 billion, up 1.6% from fiscal 2018. Full-year net income also was up 1.6% to $615.5 million.

Although there typically are more companies doing reverse stock splits to boost slumping share prices, there have been some recent examples of corporations with local ties conducting a stock split.

In February 2018, Herbalife Nutrition Ltd. responded in part to its share price reaching an all-time high of $95.93 by conducting a two-for-one split. It was Herbalife’s first stock split since 2011.

In July 2015, Reynolds American Inc. conducted a two-for-one stock split, while in January 2015, Hanesbrands did a four-for-one stock split.

Although there is no economic value from stock splits, there is an informational and perception value, said Tony Plath, a retired finance professor at UNC Charlotte.

“Old Dominion is bucking the buyback trend because they have exactly the opposite problem that firms buying back their own stock face,” Plath said. “It is dealing with an overvaluation issue in the equity market with respect to its shares, while companies buying back their own shares are dealing with an undervaluation issue.

“Since Old Dominion has done a series of these transactions over the years, that would indicate its stock has continually and consistently moved upward over time, and out of its perceived favorable trading range.”




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