Covenant Profits Plunge 58% in Second Quarter, Still Beat Low Analyst Forecast
Covenant Transportation Group announced profits plunged 58% in the second quarter, slipping to the lowest level since March 2014 even though the truckload carrier surpassed the low expectations of industry analysts.
The Chattanooga, Tenn., company made $1.5 million or 8 cents per share, edging out the Bloomberg News consensus forecast of $1 million in profits or 7 cents for the second quarter.
However, one year ago the company made $3.6 million or 20 cents.
Revenue increased 3.5% to $164.3 million, but the company suffered from a slowdown in the automotive sector so far in 2017 after several strong years. Operating expenses also grew 5.8% year-over-year to $160.4 million, washing away the top-line growth.
“April was the slowest month overall, in part due to a reduction of a portion of freight from customers,” Chairman and CEO David Parker said. “Freight demand improved gradually in May as we replaced the lost freight with new, high-quality freight.
“In June, capacity tightened resulting in a 0.5% year-over-year increase in average miles per tractor despite our Star subsidiary experiencing a 6% reduction due to automotive plant shutdowns in its network as automotive manufacturers managed new vehicle inventories.”
Revenue in asset-based operations rose to $147.6 million, an increase of $2.9 million compared with the second quarter of 2016. However, freight revenue per tractor per week fell 0.2% to $3,754, and the average miles per tractor fell 0.7% to 30,105.
“The main factors impacting the decreased utilization were the temporary impacts of replacing the customer freight we lowered in April and the loss of freight from automotive plant shutdowns, partially offset by a higher average seated truck percentage,” Parker said.
Subsidiary Southern Refrigerated Transport also struggled to keep pace in the second quarter on a year-over-year basis. Revenue fell 5% year-over year and ended with an operating loss, although the carrier didn’t provide specifics for the division. Average freight revenue per tractor dropped 1.6%, and average miles per tractor fell 1.9% even though prices went up.
Covenant Transportation Solutions, its small freight brokerage division, reported revenue grew 18% to $16.7 million.
In the first half of the year, revenue grew 2.5% to $323 million, but if fuel surcharges are removed, the result was a 1.2% decline to $285.7 million. Profits plummeted 81% to $1.5 million or 8 cents.
Covenant ranks No. 47 on the Transport Topics Top 100 list of the largest North American for-hire carriers.
