Covenant Logistics Group sees improvement in the overall freight market but not enough for a 2024 recovery, according to Chairman and CEO David Parker.
Chattanooga, Tennessee-based Covenant (NASDAQ: CVLG) reported second-quarter earnings after the market closed Wednesday. Company officials held a conference call to discuss the results with analysts on Thursday.
“I think things have bottomed out, and I do think that it’s all because of the capacity that has left that we’ve all been figuring out how long it’s going to take in the last two years for capacity to leave,” Parker said. “But I have a feeling that until more capacity leaves, I think that what we’re seeing today is kind of where we’re going to be for the next few months.”
Covenant reported revenue of $287.5 million in the second quarter, an increase of 4.7% year over year.
The company posted adjusted second-quarter earnings of $1.04 cents per share, a 2.8% decrease compared to the same year-ago period.
Related: Covenant Logistics sees 4.7% rise in Q2 earnings amid ‘weak’ freight market
Parker noted Covenant has seen several rate increases over the past few weeks, something that had not occurred in almost two years.
“We actually have customers that are at least open and willing to have discussions about our costs and those kinds of things. Those are events that have not happened in the last two years, that are starting to happen now,” Parker said. “We don’t have the momentum yet to go full pledge to say rollout rate increases all over to every customer, but we’re looking at that, and the ones that are not performing well are the ones that we’re going to have talks with.”
Covenant’s second-quarter freight revenue, excluding fuel charges, increased 5.3% year over year to $256.5 million, and adjusted operating income increased 15% year over year to $18.7 million.
“The increase in freight revenue was primarily derived from growth in average tractor counts within our asset-based truckload segments consisting of expedited and dedicated,” Tripp Grant, executive vice president, said. “The growth in adjusted operating income was principally derived from our asset-based dedicated segment in both of our asset-light segments, managed freight and warehousing.”
Covenant’s average freight revenue per tractor per week in the second quarter increased about 1% year over year to $5,726, while average freight revenue per total mile increased 2.6% to $2.38. Average miles per tractor per period decreased 0.5% year over year to 20,667.
The company’s number of weighted tractors during the quarter increased 11% year over year to 1,384.
“Regarding our outlook for the future as we head into the third quarter of the year, we believe freight fundamentals are continuing to improve through excess carrier capacity slowly exiting the market with unsustainable conditions, absent an outside catalyst to facilitate improved demand,” Paul Bunn, president and chief operating officer, said. “We remain optimistic about our business model, as evidenced by the durability and growth of our core operations over the last 12 months. In the third quarter, we believe we have the momentum necessary to produce sequential operating income growth throughout the year.”
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