Covenant Logistics Group said its third quarter results were hampered by a weak freight market, but executives said they remain optimistic about the company’s “resilient operating model.”
Chattanooga, Tennessee-based Covenant (NASDAQ: CVLG) reported adjusted earnings per share of $1.13 in the quarter, 1 cent shy of the consensus estimate.
The truckload transportation services provider posted third-quarter revenue of $288.7 million, missing analysts’ revenue prediction of $293 million for the period.
“The company’s steady performance in a weak freight market has been encouraging and reflects progress on our strategic plan,” David Parker, chairman and CEO, stated in a news release. “Entering 2024, we believe our more resilient operating model, together with the steps we are taking to reduce costs and inefficiencies, will continue to position Covenant to generate attractive returns and mitigate volatility across economic and freight market cycles.”
Total revenue for the third quarter fell 7.4% on a year-over-year (y/y) basis, while EPS declined 26% y/y. The company’s total freight revenue decreased 5% y/y to $253.3 million.
“For the quarter, total revenue in our truckload operations decreased 8.3% y/y, to $193.7 million, while averaging 192 fewer tractors, compared to 2022,” Paul Bunn, Covenant’s president and COO, said in a statement. “The revenue decrease consisted of $7.8 million lower freight revenue and $9.8 million lower fuel surcharge revenue. The decrease in freight revenue primarily related to the ongoing execution of our capital allocation program, including reduction of tractors associated with less profitable contracts, growth of units allocated to the AAT business unit acquired in 2022, and the acquisition of Lew Thompson and Son Trucking in the second quarter of this year.”
Freight revenue per tractor per week increased 3.9% to $5,677. The expedited truckload segment revenue increased 0.1% to $91.6 million, and the dedicated segment revenue dipped 10.5% to $66.9 million.
Covenant’s managed freight segment saw revenue of $69.7 million in the third quarter, a decrease of 11% from the same time last year. The warehousing segment saw revenue of $25 million during the quarter, a 14.8% y/y increase.
“While we are pleased with our model as it stands today, we are also optimistic about our ability to continue making incremental progress to improving it through our capital allocation program,” Parker said. “For the fourth quarter, we expect our revenue and earnings to experience a modest decline sequentially due to a cyber-attack on a major customer in our expedited division and the impact of the United Auto Workers strike in our dedicated division, which has temporarily depressed load volumes and revenue per truck.”
Covenant will hold a conference call to discuss results with analysts on Thursday at 10 a.m.
Covenant Logistics GroupQ3/23Q3/22Y/Y % ChangeTotal revenue$288.7$311.8(7.4%)Truckload combined:Total revenue$193.6$211.2(8.3%)Freight revenue (ex fuel)$158.6$166.4(4.6%)Average tractors2,1262,318(8.2%)Revenue per total mile$2.33$2.46(5.2%)Revenue/tractor/week$5,677$5,4623.9%Adjusted OR %91.9%92.1%(0.2%)Managed freight:Revenue$69.7$78.3(10.9%)Adjusted operating income$3.8$8.6(55.8%)Adjusted OR %89%94.5%(5.8%)Expedited freight:Revenue (ex fuel)$91.68$91.630.05%Adjusted operating income$8.5$10.7(20.5%)Adjusted OR %90.7%88.2%2.8%Dedicated freight:Revenue (ex fuel)$66.9$74.7(10.4%)Adjusted operating income$4.2$2.382%Adjusted OR %93.6%96.8%(3.3%)Adjusted earnings per share$1.13$1.52(25.6%)Revenue and operating income in millions.
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