Covenant Q1 Profit Slumps 76% on Freight Rate Weakness

Chattanooga, Tenn.-based Covenant Logistics posted a profit of $3.97 million in the first quarter, compared with a profit of $16.64 million in the first quarter of 2023. (Covenant Logistics)

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Covenant Logistics Group profits tumbled in the first quarter of 2024, with freight rates and volumes taking a toll on earnings as expected, and little improvement expected through the rest of 2024, according to its top executive.

The Chattanooga, Tenn.-based truckload and expedited carrier posted a profit of $3.97 million, or 29 cents per diluted share, in the most recent three months, down 76.14% compared with $16.64 million, $1.20, in the same period a year earlier, it said April 24.

Covenant Logistics ranks No. 46 on the Transport Topics Top 100 list of the largest for-hire companies in North America as well as No. 2 on the air/expedited list and No. 15 on the truckload/dedicated list. And it ranks No. 76 on the Transport Topics Top 100 list of the largest logistics companies in North America.

Operating income at the company slumped to $4.335 million in Q1 from $17.632 million a year earlier.

Covenant’s total revenue was $278.76 million, up 4.46% compared with $266.85 million a year earlier.

The company reported freight revenue totaling $247.69 million, up 6.11% compared with $233.42 million a year earlier.

“We are once again pleased with our quarterly results, which were achieved during a very difficult operating environment. Although we believe freight market fundamentals are slowly improving, the second quarter has provided little evidence of a 2024 recovery,” CEO David Parker said.

Truckload revenues for the company in the quarter totaled $189.96 million, up 7.47% compared with $181.14 million in the same period a year earlier.

However, the company’s truckload operating ratio was 100, compared with 90.9 a year earlier.

Operating ratio provides insight into how well a company is balancing its costs and revenue generation. The lower the ratio, the better a company’s performance.

Covenant’s average truckload haul length came in at 387 miles, compared with 486 miles in the first quarter of 2023.

The company’s average freight revenue per tractor per week in the quarter for the segment rose to $5,651 from $5,495, but the average revenue per total mile fell to $2.35 from $2.39.

“The increase in freight revenue primarily related to operating 72 or 3.4% more average tractors combined with improved utilization, offset by lower freight revenue per total mile compared to the prior year,” Chief Operating Officer Paul Bunn said.

Covenant’s expedited operations posted total revenue of $105.47 million in Q1, up 4.53% from $100.9 million a year ago.

The unit also saw a decline in its operating ratio, 95.5, compared with 90.8 a year earlier.

The average length of an expedited haul was 1,189 miles, compared with 1,367 miles a year earlier.

“Average total tractors [for the expedited segment] increased by 44 units or 5.1% to 900, compared to 856 in the prior year quarter,” Bunn said. “Average freight revenue per tractor per week was comparable to the prior year as a result of a 6.6% improvement to utilization, offset by a reduction in average freight revenue per total mile.

“The improvement in utilization in a quarter plagued by winter weather is a testament to the team’s ability to safely navigate obstacles during difficult conditions.”

Covenant’s dedicated operations posted total revenue of $84.48 million, up 5.28% from $80.24 million a year earlier.

It too reported a decline in its operating ratio, 105.6, compared with 91.1 a year earlier.

The average length of the company’s dedicated hauls was 171 miles, compared with 235 miles in the same period a year earlier.

“Our strategy of exiting underperforming business and investing in niche areas with true value-added services are driving improvements to our top-line and bottom-line results in this segment,” Bunn said.