Covenant Transportation Group Inc. warned Wednesday that its second quarter earnings will be lower than a year ago due to the weakening freight market this spring.
The Chattanooga-based truck carrier had previously said it expected second quarter profits to be comparable with the 54 cents per share earned in the spring quarter of 2018. Covenant CEO David Parker said today the company now expects earnings to decline this year and be in the range of 34 to 35 cents per share in the three months ended June 30.
"Contrary to normal seasonal patterns, the truckload freight environment remained sluggish through most of the second quarter," Parker said. "We attribute the softer freight environment to factors such as continued excess inventory levels, a soft produce season, and the extra capacity of Class 8 tractors that entered the U.S. market over the last 9-12 months."
Parker said freight revenue in the past three months was up 14% from a year ago, primarily due to Covenant's acquisition of Landair last July.
We are starting to see the early favorable impact on freight availability of the marginal correction of overcapacity and expect capacity reduction to continue throughout the remainder of 2019," Parker said, hinting at improvement in the balance of the year. "Our contract logistics' customers have maintained steady freight for the first half of the year and we expect their business to remain steady through the end of the year."
Shares of Covenant closed today down nearly 3.4%, or 51 cents per share, at $14.65 a share in Nasdaq trading.