Shares of Covenant Transport Inc. plunged 16.2 percent to a nine-month low after the company warned that earnings for the third quarter are likely to be only about a third of what they were a year ago.
The Chattanooga-based trucking company said higher depreciation expenses and lower freight revenue will cut quarterly profits from 42 cents per share a year ago to only 12 to 17 cents per share in the same period this year.
“After reviewing preliminary financial and operating information through the end of September, we expect to report net income in the range of $2.1 million to $3.2 million, or 12 cents to 17 cents per diluted share, for the third quarter of 2016,” Covenant CEO David Parker said in a statement today. “This compares to a reported net income of $7.6 million, or 42 cents per diluted share, for the third quarter of 2015.”
Parker said depreciation costs increased $4.6 million to $19.3 million in the three-month period, primarily as a result of lowering the salvage values for tractors being replaced with new models. Covenant said the lower trade-in prices “could continue for an extended period.”
Covenant also had a $1.7 million increase in casualty insurance and claims expense in the third quarter of this year over last year due to more accidents in the period.
“Average freight revenue per tractor declined 1.2 percent due to a weaker truckload freight environment,” Parker said.
Covenant is due to report its third quarter earnings after the market closes next Wednesday.
In response to today’s earnings warning, shares of Covenant declined by $2.88 per share, or 16.24 percent, to close at $14.85 – the lowest share price since Jan. 19.