Covenant Logistics Group (NASDAQ: CVLG) reported adjusted second-quarter earnings of 96 cents per share after the close Wednesday, ahead of the consensus estimate of 67 cents per share. Adjusted net income was $16.3 million compared to just north of $400,000 in the year-ago quarter.
The quarterly result was the best in the company’s history.
“In the second quarter, we saw freight market demand firing on all cylinders as a result of growing economic activity, low inventories, and supply chain disruptions, accompanied by constrained supply due to an intensifying national driver shortage,” said David Parker, chairman and CEO, in a press release. “These conditions have continued into the third quarter.”
The Chattanooga, Tennessee-based carrier’s combined truckload fleet saw revenue excluding fuel surcharges increase 8.5% year-over-year as revenue per tractor per week increased 24.8% to $4,551 partially offset by a 13.1% decline in average tractor count at 2,451 units. The increase in revenue per tractor was driven by a 10.1% lift in revenue per loaded mile excluding fuel ($2.24) and a 13.9% increase in miles per tractor.
The year-over-year comparisons are to the second quarter of 2020, which was severely impacted by COVID protocols and widespread shutdowns.
The fleet reduction is part of the company’s efforts to focus more on its dedicated and expedited offerings versus less profitable operations like solo-driven refrigerated, which it has exited, and one-way irregular routes.
The TL segment posted a 92.7% adjusted operating ratio, 730 basis points better year-over-year. The salaries, wages and benefits line declined 450 bps as a percentage of revenue, but rent and purchased transportation expenses increased 490 bps as capacity remains very tight and rates have increased.
“Although we are pleased with these results, we recognize the opportunity for further improvement, particularly in our Dedicated segment,” Parker added. “In the short run, this means continuing to improve rates and contractual terms with customers who are not yielding the level of consistent profit we expect from this segment of the business, and in the long run, this means holding ourselves accountable for improved margins and returns across all aspects of our business.”
Covenant’s dedicated segment operated at a slim operating profit, posting a 99.4% adjusted OR, 190 bps better year-over-year.
The company will host a call at 10 a.m. on Thursday to discuss second-quarter results with analysts.