Truckload carrier Heartland Express expects the current freight environment marked by soft demand and rate pressure to last another one to two quarters.
Heartland (NASDAQ: HTLD) reported first-quarter earnings per share of 16 cents late Thursday, a 2-cent miss, according to Seeking Alpha. The result was also 5 cents lower year over year (y/y). The period included $6.1 million in incremental interest expense tied to the acquisitions of Contract Freighters Inc. and Smith Transport.
Gains on equipment sales were $2.5 million higher y/y in the quarter, which was a 2-cent tailwind to results.
The new fleets resulted in revenue more than doubling to $331 million. However, those fleets are being integrated and are still operating at a much higher cost structure.
North Liberty, Iowa-based Heartland reported a 91.4% operating ratio in the quarter, which was 970 basis points worse y/y. The company’s legacy fleets operated at a low-80% OR while the two additions recorded upper-90s ORs.
“We are attempting to improve the financial results of two large organizations during a period where freight demand is significantly less than it has been in the last two years along with significant pressure from many shippers to reduce freight rates while operational costs continue to rise,” CEO Mike Gerdin stated in a news release.
The company does not provide operating metrics for utilization and pricing in its quarterly reports.
Heartland expects to record $15 million to $20 million in gains on sale in 2023 as it disposes of older equipment at Smith and CFI.
Since the close of the acquisitions, Heartland has repaid $129 million in debt and financing lease obligations. The company still has $366 million outstanding.
“Given what we have experienced and based on feedback from our customers, we expect volatile freight demand for at least the next two quarters of 2023.”
Table: Heartland’s key performance indicators
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