Heartland Express in Red for Q3 Again but Loss Narrows
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Losses at Heartland Express narrowed year over year in the third quarter as both legacy brands and two more recently acquired units turned in an improved performance.
North Liberty, Iowa-based Heartland posted a net loss of $9.3 million, or negative 12 cents per diluted share, compared with a net loss of $10.7 million, negative 14 cents, in the same period a year earlier.
The truckload carrier saw revenue fall 11.9% year on year to $259.9 million in Q3 from $295 million, with executives calling the most recent four quarters the worst 12 months the trucking industry has seen in more than 45 years.
However, operating ratios at legacy brands Heartland Express and Millis Transfer averaged 92.3 across the four most recent quarters, which it believes outperformed its truckload peers.
“We have accomplished these results solely by cost measures and business alignment initiatives with no additional assistance from freight market demand improvements,” CEO Mike Gerdin said in a statement.
Also, Heartland said Smith Transport — which was acquired in June 2022 — improved its operating ratio by 6 percentage points in the six months that ended Sept. 30 compared with the prior six-month period.
The truckload operations of Contract Freighters (CFI), bought from TFI International in August 2022, meanwhile, boosted its operating ratio by 5 percentage points over the same period.
Operating ratio provides insight on how well a company is balancing its costs and revenue generation. The lower the ratio, the better a company’s performance.
Overall, Heartland posted an operating ratio of 102.7 in the most recent three-month period, compared with 102.5 in the same quarter in 2023.
A continuation of the weak truckload freight environment led to the loss, decline in revenue and overall operating ratio, Gerdin said.
“This prolonged recessionary period continues to be driven by a combination of lower freight demand and excess truck capacity in the marketplace,” he said. “This significant imbalance of supply and demand for trucking services began in the back half of 2022, continued in 2023, and through [Sept. 30] we did not see meaningful or sustained improvements in the freight environment.
“We believe that we will need a meaningful turnaround in the freight environment, and the associated increase in demand for our on-time freight service, in order to improve the utilization of our assets and lower our consolidated operating ratio back to our long-term expectations.”
R.W. Baird analysts Garrett Holland and Joseph Higgins said the earnings per share missed consensus expectations of 1 cent per share.
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“Overall, [Heartland] likely needs more industry capacity rationalization and cyclical help to realize benefits from CFI and Smith Transport integration efforts and its larger scale,” the analysts said.
Heartland Express ranks No. 36 on the Transport Topics Top 100 list of the largest for-hire carriers in North America, up from No. 58 a year earlier. The company ranks No. 11 among truckload carriers.
But some green shoots are starting to emerge, Gerdin noted. “In October, we have begun to see encouraging signs pointing to the early stages of a potential recovery in freight demand, but we do not expect impactful improvement until 2025,” he observed.
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