Covenant Transport driver David Bryson stops at a welcome center near Fair Play, S.C.With its stock price up and the economy fueling double-digit revenue gains this fall, Covenant Transportation Group, Inc. said today it is issuing another 2.2 million shares of stock.
The Chattanooga-based trucking company, which currently has nearly 15 million shares outstanidng, could fetch more than $48 million from the additional stock, which the company said it would use to reduce its debt.
The stock issue comes as the company said today it expects fourth quarter profits to be "materially greater" than a year ago due to strong shipping demand this fall.
Covenant said in a statement that it has "experienced improvements in its operating results for the month of October 2014, which are expected to continue during the fourth quarter of 2014."
Covenant earned 20 cents per share a year ago and analysts are forcasting earnings this quarter of 40 cents per share.
Covenant said its revenue grew by 10.4 percent in October. In the first 12 days of November, average freight revenue per tractor per week grew by 16 percent. Average seated truck count for Covenant has increased by 35 trucks from a year ago to 2,743.
Fuel prices are also down, but since the company hedges its fuel usage the drop won't have much impact on Covenant profits.
In announcing the stock issue today, Covenant said it will grant the underwriters of the stock offering a 30-day option to purchase up to 330,000 additional shares of its Covenant's common stock at the same price per share. The offering is subject to market conditions, and there can be no assurance as to whether or when the offering may be completed.
All of the shares included in the offering are primary shares offered by the company. Covenant said it will use the net proceeds from the offering to repay outstanding indebtedness and for offering expenses.
Stephens Inc. and BB&T Capital Markets will serve as the joint book-running managers for the offering. Avondale Partners, Cowen and Company, and Wolfe Research Securities will serve as co-managing underwriters for the offering.
The announcement of the stock issue and improved fourth quarter results came after the market close today. Prior to the announcements, Covenant shares fell by 62 cents per share, or 2.7 percent, to close at $22.17.
Despite today's price drop, Covenant's stock price has more than doubled from the start of the year when Covenent was priced at $8.21 per share.