As the freight recession rolls on, officials for Covenant Logistics Group said they don’t anticipate conditions for carriers to get much worse.
Chattanooga, Tennessee-based Covenant (NASDAQ: CVLG) reported third-quarter earnings after the market closed Wednesday. Company officials held a conference call to discuss the results with analysts on Thursday.
“I do believe that we’re at the bottom, and I think that we’re just kind of going along the bottom … waiting on the catalyst to move things forward,” Chairman and CEO David Parker said. “That’s where I think the freight market is at.”
The carrier reported third-quarter adjusted earnings per share of $1.09, while posting total revenue of $287.8 million.
Adjusted net income was $19.3 million, compared to $17.8 million in the same year-ago quarter.
Parker said he sees the possibility that contract rates could rise as carriers approach the 2025 bid season. During the company’s second-quarter earnings call on July 25, Parker noted that he had seen several rate increases over the past few weeks, something that had not occurred in almost two years.
“I think that we will be successful in obtaining rate increases. It’s not going to be from a lack of asking our customers. I don’t think that our customers are expecting us and this industry to go three years without a rate increase. I don’t believe that, and I think that we will be successful,” Parker said. “What do I think that number is? I think that number could be 2% to 3%.”
Freight revenue per tractor per week fell about 1% to $5,637. The expedited truckload segment revenue decreased 8% to $104.3 million, while dedicated segment revenue rose 18% to $94.7 million.
The warehousing segment had revenue of $25.1 million during the quarter, a 1% year-over-year increase.
Tripp Grant, Covenant’s CFO, said he sees an “upside” to the company’s performance over the next several quarters, with room for improvement in segments such as managed freight.
Covenant’s managed freight segment saw revenue of $63.3 million in the third quarter, a decrease of 9% from the same time last year.
“The biggest wild card in all four of our segments is our managed freight business, because you can look back in 2021 and 2022 and see what it did. I don’t think a sub 90 operating ratio is realistic for a managed freight segment, certainly not long term,” Grant said. “Our focus is going to be growing the things that we control, focusing on profitable business and customers that we can add value to. I think you’ll see profitability grow or improve.”
