Covenant Transportation Group reported a drop in first quarter earnings, but the results were still ahead of analysts expectations.
The Chattanooga-based trucking company said today it earned $500,000, or 3 cent per share, on revenues of $158.7 million. Revenues were up 1.5 percent, but net income was down significantly from the $4.4 million, or 24 cents per share, earned by Covenant in the same period a year earlier.
The results topped Wall Street expectations, however. The average estimate of three analysts surveyed by Zacks Investment Research was for earnings of 2 cents per share.
"Freight demand was moderate during the quarter, and our industry continued to have excess capacity available in advance of the scheduled implementation and enforcement of the electronic logging mandate in December 2017," Covenant CEO David Parker said in a statement. "Many shippers engaged in bid processes as a means to lower upward pressure on their freight rates before any meaningful tightening of capacity. In this environment, we were pleased to raise our yield slightly through eliminating non-revenue miles and allocating our equipment more effectively."
Parker said company margins dropped across the business as the company raised driver pay and continued to invest in new equipment even amid a highly competitive market.
"Salaries, wages and related expenses increased approximately 4.0 cents per mile due primarily to a higher percentage of our fleet comprised of team-driven tractors and employee pay adjustments since the first quarter of 2016," Parker said. "Operations and maintenance expenses increased approximately 2.1 cents per mile due primarily due to additional tractor maintenance expense associated with extending the trade cycle of our tractors we commenced in the second half of 2016 and higher unloading expense associated with specific dedicated contracts that we have added since the first quarter of 2016.
Covenant shares have fallen 12 percent since the beginning of the year and are down 27 percent from a year ago. Ahead of the earnings release after the market closed today, Covenant shares fell by 7 cents per share to $17.06 per share — the lowest price in nearly six months.