A Covenant Transport truck drives along I-24 over Cummings Highway in this file photo.Covenant Transport reported Tuesday higher profits for a second consecutive period as freight activity continued to improve in the third quarter.
In the three months ending Sept. 30, freight revenue increased 5.1 percent to $133 million, and net income increased to $1 million, or 7 cents per share, of total asset-based revenue of $161.6 million.
Sales at Covenant Transport Solutions, the company's freight brokerage subsidiary, remained flat at $6.8 million for the quarter, operating at a loss of $221,000.
The good overall news for the trucking company may help dampen the memory of the $11.2 million loss reported by Covenant in the third quarter of 2011.
David Parker, chairman, president and CEO of Covenant, said freight revenues were on an upward trajectory.
While the market was weak initially during the quarter, sales grew in September and continued to improve through October, he said.
Fuel prices were a major factor, as diesel prices fell sharply during the second quarter of 2012, escalated over the first two months of the quarter before steadying in September, Parker said.
"Our financial and operating performance in the third quarter of 2012 was encouraging in light of a seasonally weak overall freight environment and rising diesel fuel prices," Parker said.
Though the company passes much of the increase in fuel costs onto its customers and ultimately onto consumers, there is a slight lag, which Parker said hurt earnings by about 16 cents per share.
He attributed part of the increase to a disruptive software upgrade the company performed in the third quarter of 2011, which hurt operations. But he noted that Covenant still grew average freight revenue per truck by 2.2 percent from earlier in 2012.
The company has worked to add drivers and grow the portion of its fleet driven by teams, which helps keep trucks on the road and out of parking lots where they gather dust, he said. By keeping trucks on the move, Covenant was able to "overcome slower overall industry demand," he said.
Per tractor, average freight revenue per week increased about $400 to $3,408, a jump of about 8.7 cents per mile. At the same time, expenses increased as well. Salaries increased by 1.4 cents per mile, and owner-operator expenses increased about 5.6 cents per mile, the company reported.
As Covenant shifts to an owner-operator fleet from one driven by emloyees, the company disposed of 600 tractors in the first nine months of the year, while taking delivery of about 236 new tractors during the same period. Since the beginning of the year, Covenant has started 52 new owner-operators.
The company's stock traded below book value at the end of the day on Tuesday, down 2 cents to $4.55 per share.
Contact staff writer Ellis Smith at esmith@timesfree press.com or 423-757-6315.