published Thursday, January 31st, 2013

Covenant Transport quarterly earnings bounce back

A Covenant Transport truck drives along I-24 over Cummings Highway in this file photo.
A Covenant Transport truck drives along I-24 over Cummings Highway in this file photo.
Photo by Staff File Photo.

Chattanooga-based Covenant Transport beat Wall Street expectations by 2 cents per share in the fourth quarter, growing its trucking business to $1.5 million in net income during the final three months of 2012.

Covenant's positive earnings announcement of 10 cents per share helped partially make up for the $2.2 million, or 15 cent per share loss in the fourth quarter of 2011.

"Our fourth quarter results marked continued year-over-year improvement in our financial and operating performance," said David Parker, president and CEO of the company.

Total revenue for the quarter increased nearly 10 percent to $177.5 million from the same quarter in 2011, and freight revenue also increased about 10 percent to $140 million, according to Covenant's earnings release. Freight revenue makes up the largest portion of the company's total revenue.

"Consistent with our strategic plan, we allocated assets toward refrigerated and high-value team operations, reduced exposure to solo dry van operations and increased our use of owner-operators," Parker said.

For the year, both total revenue and freight revenue increased 3.3 percent. Total revenue increased to $674.3 million from $652.6 million in 2011, and freight revenue increased to $529.1 million from $512 million the prior year.

Those gains led to a big uptick in earnings for all of 2012. The company reported net income of $6.1 million, or 41 cents per share, compared to a net loss of $14.3 million, or 97 cents per share, in 2011.

Parker chalked some of the gains up to a 14 percent jump in the average freight revenue per tractor per week, which increased to $3,509, thanks to the increase in team drivers and "improved use of technology."

The company still has room to improve, he said. Salaries and owner-operator expenses increased, and the company's fuel surcharge programs are "inadequate to recover a fair portion of rising fuel costs," he said.

To save more money, Covenant continued shifting away from a company-owned fleet toward an owner-operator model, disposing of 650 tractors and taking delivery of 425 new ones.

Though that may not be enough to guarantee a perfect year in 2013, the trucking environment will continue to improve, Parker predicted. He expects earnings to fall in the first half of 2013 compared to 2012, not becoming positive until the second half of the year.

Earnings per share for 2013 will "increase meaningfully" over 2012, he added.

Covenant's stock closed on Wednesday at $6.43 per share, up 15 cents or 2.39 percent.

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