Covenant's Q3 Net Income and Revenue Take Slight Dips
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Covenant Logistics Group saw slight dips in net income and revenue in the third quarter as the Chattanooga, Tenn.-based carrier continued to face a challenging freight environment.
The company reported third-quarter net income of $13 million, or 94 cents per share, compared with $13.5 million, 99 cents, in the year-ago period. Revenue dipped slightly to $287.9 million from $288.7 million a year ago. The company’s Q3 operating income rose to $16.2 million from $15.1 million, and Covenant improved its operating ratio to 94.4 from 94.8 year over year.
Overall Truckload division revenue rose 2.8% from $193.6 million to $199 million, driven by fleet expansion and a stronger rate per mile but partially offset by reduced fuel surcharge revenue. Covenant reported a 1% decrease in operating cost per mile, primarily due to lower fuel costs, though adjusted operating costs per mile rose by 3.2%, attributed to rising driver wages and a significant workers’ compensation claim.
Covenant’s Dedicated division showed particular strength, with revenue surging 23.5% to $94.7 million from $80.2 million. The increase was attributed to a higher tractor count — up 13.6% year over year — and improved metrics in freight revenue per mile and utilization. However, Covenant President Paul Bunn noted that the company’s expansion in Dedicated services, which require specialized driver expertise, contributed to an 8% year-over-year increase in per-mile costs for salaries and related expenses.
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The Managed Freight segment posted a 9.1% year-over-year revenue drop to $63.4 million from $69.7 million, while its operating income fell 34.5%, affected by softer volumes and a significant cargo-related claim. The Warehousing segment reported a modest 0.5% increase in freight revenue to $25.2 million from $25 million, with operating income benefiting from improved labor efficiencies and recent customer rate increases.
The Expedited segment, however, saw a 4.7% revenue decline, to $104.3 million from $114.3 million, impacted by a 4.8% decrease in freight revenue per tractor per week, with both revenue per mile and utilization declining.
“Our core business continues to perform well despite the prolonged general freight market down cycle,” said David R. Parker, Covenant’s chairman and CEO. He noted that strategic initiatives to streamline costs and allocate capital more effectively led to a $36.6 million sequential reduction in net debt. Total indebtedness has decreased by $11.6 million since December 2023.
Insurance and claims expenses per mile declined by 8% due to a large claim settlement from last year, though equipment-related expenses remained flat year over year. Losses on equipment sales totaled $200,000, compared with a $600,000 gain in the prior year.
Parker struck a cautious tone about the future, expressing that the freight market’s recovery may proceed slowly.
“Although we are pleased with our results for the period, our belief is that the overall general freight market will take time to meaningfully improve,” he said. “While we are seeing some green shoots in the form of new dedicated business awards and a small number of customer rate increases, these wins have somewhat been offset with softer than anticipated volumes, particularly in our Expedited segment."
Covenant ranks No. 40 on the Transport Topics Top 100 list of the largest for-hire carriers in North America, and No. 76 on the TT 100 logistics list.
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