Covenant Lowers Second Quarter Earnings Projections
Covenant Transportation Group Inc. is lowering expectations for earnings in the second-quarter, one day after another large for-hire truckload carrier, Werner Enterprises, made a similar downgrade.
Covenant says lower freight revenue per mile, shortfalls at its refrigerated van subsidiary, lower fuel subsidy recovery, and other factors in the sluggish freight market will lower expected earnings to 17 cents to 23 cents per share, down from previous estimates of 28 cents to 33 cents per share. Earnings in the second-quarter of 2015 were 60 cents per share and first-quarter net income was 21 cents per share.
Werner Enterprises, which ranks No. 16 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, also blamed the sluggish freight market and lower used truck sale prices when it reduced estimates for earnings in the second quarter on June 21.
Covenant attributes a large portion of the lowered expectations to Southern Refrigerated Transport, a refrigerated van subsidiary.
“We continue to view turning around SRT’s performance as our most important objective. To address the negative trend, we continue to adjust resources to support SRT’s efforts. While we have been pleased with management’s energy and receptivity at SRT, we do not view the situation as a near-term turnaround,” said David R. Parker, chairman and CEO.
Covenant, which ranks No. 46 on the for-hire TT100, also cites the current market for negative trends on freight revenue per loaded mile, average miles per tractor, and empty miles percentage.
Weak used truck prices also hurt, as did lower fuel surcharges because of falling diesel prices, and a 2% drop in the number of trailers operating than previously expected, according to the Chattanooga, Tennessee-based carrier.
