Covenant, Heartland Report Lower Third-Quarter Earnings
Covenant Transportation Group and Heartland Express Inc. reported lower third-quarter earnings, citing factors such as a moderate freight market and excess available capacity.
Net income at Covenant plummeted 62% to $2.9 million, or 16 cents per share, one week after its CEO warned investors that earnings would come in well below expectations. Earnings fell 17% at Heartland to $12.5 million, or 15 cents.
Covenant’s results compared with $7.6 million, or 42 cents, one year ago. The company blamed higher equipment depreciation and insurance expenses, and lower average freight revenue per tractor for the results.
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Heartland earned $15.1 million in last year’s third quarter. The percentage of revenue decline to $149.3 million matched the 17% net income decline.
“The trucking environment in the third quarter was characterized by moderate freight volumes and a depressed market for used tractors,” Covenant CEO David Parker said. “To combat these forces, we are taking steps to modestly reduce certain portions of our fleet, conserve capital expenditures, emphasize driver retention.”
At Heartland, CEO Mike Gerdin said, "We have continued to experience downward pressure on freight rates due to the softness in freight volumes resulting from the available capacity in the industry."
Iowa-based Heartland’s operating income, excluding interest and taxes, rose about 5% excluding the negative effect from lower gains on equipment sales. That gain was $1.5 million, down from $7.4 million. Heartland ranks No. 41 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers
Covenant’s revenue fell 5.2% to $164.5 million versus $173.5 million year-over-year.
Covenant Transportation, which ranks No. 43, reported that depreciation on equipment due to the soft used-truck market increased expenses $4.6 million or 15 cents a share. Higher casualty insurance and claims expenses increased $1.7 million, or 6 cents.
Average freight revenue per mile dropped 1% to $1.62, and revenue per tractor per week fell to $3,768 from $3,814 at this time last year. However, the company added that empty miles and average miles per tractor also slightly decreased.
“The main factors impacting the decreased utilization were a weak overall freight environment and lower seated truck percentage,” Parker said. “On average, approximately 6.4% of our fleet lacked drivers during the 2016 quarter compared with approximately 4.6% during the 2015 quarter.”
Tennessee-based Covenant’s results were in the range of its early October announcement that earnings would be 12 cents to 17 cents on a per-share basis, about half of the average analyst forecast at the time of the announcement. Heartland topped the average Bloomberg analyst forecast by 1 cent per share.
