Trading Briefly Suspended on Covenant Stock After Dismal Earnings Forecast
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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.