Chattanooga's biggest trucking company hauled less freight and reported its first quarterly loss Friday since becoming a publicly traded company in 2018 as the slowing freight market cut shipments and brokerage business in a market currently flush with trucks.
U.S. Xpress Enterprises Inc. reported a net loss of $1.4 million, or 3 cents per share, in the third quarter of 2019, compared to net income of $16.1 million, or 33 cents per share, in the prior year quarter. The results were 9 cents per share below analysts average estimate of how the company would perform in the three months ended Sept. 30, sending shares of U.S. Xpress down 7.9% in trading Friday in an otherwise up market on the New York Stock Exchange.
"The third quarter was marked by continued industry-wide overcapacity of tractors in relation to freight demand," U.S. Xpress CEO Eric Fuller said. "This overcapacity continued to pressure our revenue per mile as well as our ability to optimize equipment utilization, particularly in the non-contracted spot portions of our Over-the-Road Truckload operations. We believe the pricing environment was further impacted by unprecedented and unsustainable rate competition from digital freight brokers."
Despite the slowdown and overcapacity in the industry, U.S. Xpress is doubling down on its strategy to add and keep more drivers and trucks on the road.
"U.S. Xpress is making a bit of a gamble on market conditions improving as it continues to add tractors to the fleet, which increased by more than 5% in the quarter to 6,533 units," said Todd Maiden, a former equity analysts for RBC Capital Markets and BB&T Capital Markets who is now finance editor for the Chattanooga- based Freightwaves. "The concern is that the company is growing tractor count in a softer environment and is currently more reliant on the spot market than normal."
The over-the-road fleet for U.S. Xpress grew by 7.8% and the dedicated fleet grew 2.2% in the past year, which company officials said will allow them to capture a rebound in the spot market.
But U.S. Xpress officials said they expect the trucking market will tighten as older drivers retire, the economy improves and stricter drug testing rules limit some drivers from being on the road.
"We continue to see supply exiting the market," Fuller said in a presentation to industry analysts Friday. "Overall, we believe a sustained reduction in capacity should create more balanced market conditions during 2020."
Operating revenue for U.S. Xpress in the recent quarter totaled $428.5 million, a decrease of $31.7 million compared to the third quarter of 2018. Excluding revenue from Mexican operations, which U.S. Xpress exited in January, operating revenue decreased $18.3 million. The decrease was primarily attributable to a decrease of $19 million in brokerage revenue.
Operating income for the third quarter of 2019 was $3.3 million compared to $22.9 million in the third quarter of 2018.
"While we are clearly not satisfied with our results, we are encouraged by the operational improvements that we are driving across our organization and are optimistic that they will more visibly evidence themselves in our financial results through next year," Fuller said.
Since the company launched its initial public offering at $16 per share in June 2018, the stock price of U.S. Xpress has dropped by more than 70%.
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.