Covenant Transportation Group Inc. (NASDAQ: CVTI) reported a net loss of $3.2 million, or an earnings loss of 17 cents per share in the third quarter of 2019, missing analyst estimates by 9 cents, the company stated in its earnings release on October 22.
The Chattanooga, Tennessee-based truckload carrier said that compared to net income of $11.6 million, or earnings per share of 63 cents, for the same quarter in 2018.
Total revenue was $222.9 million, a drop of 8.4%, in the third quarter, compared with revenues of $243.3 million in the same period a year ago.
Parker said the company’s irregular route expedited and refrigerated truckload operations “exhibited significant volatility and swung to be unprofitable for the quarter.” He said the largest factors were lower rates per mile coupled with insurance and capital cost increases as compared with the same quarter in 2018.
“The freight environment was much weaker compared with the 2018 quarter, as excess industry-wide trucking capacity and weak shipping demand combined to pressure both freight rates and volumes,” said David R. Parker, chairman and chief executive of Covenant, in the release.
Freight revenue was $199.8 million in the third quarter, a decrease of 6.9%, compared with the same period a year earlier.
Total revenue in Covenant’s truckload operations was $175 million, a decrease of $22.1 million compared with the third quarter in 2018.
The average freight revenue per tractor decreased to $3,766 during the third quarter from $4,159 during the same quarter in 2018. Average freight revenue per loaded mile dropped 10.9 cents per mile, or 5.5%, compared with the same quarter in 2018.
“The main factors impacting the decreased utilization was an approximate 160 basis point decrease in the percentage of our total fleet comprised of team-driven trucks and a lower freight demand in relation to industry-wide trucking capacity,” the company said in its release.
The company’s dedicated truckload and managed freight operations were profitable and exhibited moderate year-over-year market volatility. Covenant said of its approximately 59% consolidated freight revenue, a significant portion can be attributed to the Landair acquisition back in July 2018.
The company’s managed freight segment revenue increased 3.4% to $47.8 million in the third quarter of 2019, up from $46.3 million during the third quarter of 2018. The company’s non-asset based managed freight segment consists of its freight brokerage, transportation management services, warehousing and other offerings. Its operating income was $3.7 million in the third quarter, compared with $4.2 million for the same time period a year earlier.
Looking ahead, Richard B. Cribbs, executive vice president and chief financial officer of Covenant, said the company expects business conditions to continue to be slow in the fourth quarter, compared with previous holiday peak seasons.
“Given the current imbalance of capacity and demand, we expect pricing and volume levels to remain subdued compared with the last several holiday peak seasons,” Cribbs said.
