Chattanooga-based trucking giant Covenant returns to profitability, beats fourth quarter forecasts

Truckers are seen at Covenant Transport on Tuesday, Oct. 9, 2018, in Chattanooga, Tenn. / Staff photo by C.B. Schmelter
Truckers are seen at Covenant Transport on Tuesday, Oct. 9, 2018, in Chattanooga, Tenn. / Staff photo by C.B. Schmelter

Covenant Transportation Group Inc. returned to profitability in the fourth quarter despite a 14% drop in freight revenues.

The Chattanooga-based trucking giant, which lost $3.2 million in the third quarter, said Thursday its adjusted fourth quarter earnings totaled earned $1.9 million, or 10 cents per share.

Net income in the past three months was down from the adjusted $17 million, or 92 cents per share, earned a year earlier. But the results beat the Zacks consensus forecast of only 6 cents per share for adjusted net income.

Covenant CEO David Parker said he was "relatively pleased to return to profitability" by cutting costs and boosting revenue per mile driven.

"However, by no means are we satisfied with the result.," Parker said. "For the fourth quarter and all of 2019, we battled a difficult operating environment, marked by excess industry capacity, lackluster freight volumes, intense competition from freight brokerage competitors, and higher operating costs. In this environment, we continued to execute our enterprise-wide efforts to become more deeply embedded in our customers' supply chains, capture more consistent and profitable year-round freight, and allocate capital to operations with better returns."

The fourth quarter results included a $400,000, or 2 cents per share, loss from Covenant's 49% equity investment in Transport Enterprise Leasing due to a TEL customer bankruptcy.

Richard B. Cribbs, executive vice president and chief financial officer for Covenant, said the trucking company should do better in 2020, due to declining truckload capacity and continued improvement in the U.S. economy.

"From a financial perspective, we expect operating cash flows, and our leverage ratio to improve for fiscal 2020 compared with fiscal 2019," he said. .

Ahead of the earnings announcement, Covenant shares fell by 2.1%, or 28 cents per share, to close at $12.91 per share in trading on the Nasdaq exchange Thursday.

Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.

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