Trading Briefly Suspended on Covenant Stock After Dismal Earnings Forecast
Trading of stock in Covenant Transportation Group was suspended Oct. 13 for about 30 minutes after CEO David Parker announced that third-quarter earnings could be more than 50% below the consensus from analysts.
Parker announced that net income for the third quarter would be between $2.1 million and $3.2 million, far below the $4.3 million estimates in a survey of analysts by Bloomberg News. Last year at this time, the company reported $7.6 million in profits. Earnings per share are due to come in at 12 cents to 17 cents, below the estimates of 25 cents, and at least 60% below the 42 cents year-over-year.
As a result, Covenant stock dropped nearly 20% after it closed at 17.73 on Oct. 12, but steadied midday to a 15% drop.
Depreciate costs are expected to increase $4.6 million, or 15 cents, year-over-year. Parker said the soft used-truck market could continue for an extended period of time.
“A year-over-year increase in depreciation expense for these tractors will continue to affect our results for at least the next three quarters,” he said.
Covenant will also report a $1.7 million year-over-year increase in expenses, or six cents, due to higher casualty insurance and claims rates “primarily as a result of increased frequency and severity of accidents.”
Average freight revenue per tractor is expected to decline 1.2% year-over-year, due to a weaker truckload freight environment.
The motor carrier, which ranks No. 43 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, plans to report third-quarter earnings after the market closes Oct. 19.
