Covenant Logistics Group foresees improvement in the overall freight market but does not expect a recovery in 2024, according to Chairman and CEO David Parker. The Chattanooga, Tennessee-based company (NASDAQ: CVLG) reported its second-quarter earnings after the market closed on Wednesday, with company officials discussing the results during a conference call with analysts on Thursday.
“I think things have bottomed out, and I believe it’s due to the capacity that has exited the market, which we’ve been monitoring over the past two years,” Parker stated. “However, until more capacity exits, I think we’ll maintain the current conditions for the next few months.”
Covenant reported second-quarter revenue of $287.5 million, marking a 4.7% year-over-year increase. Adjusted earnings for the quarter were $1.04 per share, a 2.8% decrease compared to the same period last year.
Related: Covenant Logistics sees 4.7% rise in Q2 earnings amid ‘weak’ freight market
Parker mentioned that Covenant has experienced several rate increases in recent weeks, a notable change after almost two years without any. “Customers are now more open to discussing our costs, something that hasn’t happened in the past two years,” Parker explained. “While we’re not ready to implement rate increases across the board, we’re considering it for underperforming customers.”
Covenant’s second-quarter freight revenue, excluding fuel charges, rose 5.3% year over year to $256.5 million, and adjusted operating income increased 15% to $18.7 million.
“The increase in freight revenue was primarily due to growth in average tractor counts within our asset-based truckload segments, which include expedited and dedicated services,” said Tripp Grant, executive vice president. “The growth in adjusted operating income was mainly driven by our asset-based dedicated segment and 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 rose 2.6% to $2.38. Average miles per tractor per period decreased 0.5% year over year to 20,667. The number of weighted tractors during the quarter increased 11% to 1,384.
“Looking ahead to the third quarter, we believe freight fundamentals are improving as excess carrier capacity exits the market,” said Paul Bunn, president and chief operating officer. “We are optimistic about our business model, as shown by the durability and growth of our core operations over the past 12 months. We expect to achieve sequential operating income growth throughout the year.”