Freight Giants Q2 Earnings: Navigating Challenges

Trucking titans Heartland Express, Covenant Logistics, and Knight-Swift recently released their Q2 earnings, showcasing a mix of challenges and cautious optimism. Heartland Express is grappling with a staggering 99.9% operating ratio, while Covenant Logistics managed to beat earnings estimates despite a weak freight market. Knight-Swift, meanwhile, sees potential market stabilization following strategic fleet optimizations and expansions.

Here are some key takeaways from their latest financial reports and what industry experts are saying about the road ahead.

Heartland Express Q2 Earnings: Nowhere to Go But Up

Operating Ratio Woes Heartland Express (HTLD) reported a disappointing Q2 operating ratio (OR) of 99.9%, and year-to-date 2024 is even worse at 102.6%. This starkly contrasts their historical OR target of 85%, signaling major challenges ahead.

With a net loss of $3.5M and an operating ratio of 99.9%, Heartland is at the break-even stage. Source: Thomas Wasson

Key Stats:

Debt Reduction: Paid down debt significantly, but still at $237.2 million.
Credit Line: No borrowings under unsecured credit line as of June 30, 2024.
Fleet Age: Average tractor and trailer ages increased, impacting efficiency.

"Heartland spent all our money on two struggling carriers [Smith Transport and Contract Freighters Inc] that looked like a good deal but are actually a hot mess," sums up industry analyst Thomas Wasson.

Covenant Logistics Q2 Earnings: Solid Amidst Weak Market

Revenue & Earnings Beat: Covenant Logistics (CVLG) reported Q2 revenue of $287.5 million, a 4.7% increase YoY, and adjusted EPS of $1.04, beating the consensus estimate.

Covenant Logistics Group	Q2/24	Q2/23	Y/Y % Change
Total revenue	$287M	$274M	4.7%
Truckload combined:
Revenue	$201M	$185M	8.7%
Freight revenue (ex fuel)	$171M	$155M	10.3%
Revenue per total mile	$2.38	$2.32	2.6%
Revenue/tractor/week	$5,726	$5,678	1%
Adjusted OR %	92.5%	91.6%	1%
Managed freight:
Revenue	$60.3M	$63.2M	(4.5%)
Adjusted operating income	$3.594M	$2.070M	74%
Adjusted OR %	94.5%	96.9%	(2.5%)
Expedited freight:
Revenue (ex fuel)	$88.9M	$85.9M	3.4%
Adjusted operating income	$5.302M	$7.953M	(33%)
Adjusted OR %	95.6%	94.4%	1.3%
Dedicated freight:
Revenue (ex fuel)	$93.4M	$81.1M	15%
Adjusted operating income	$7.486M	$5.094M	46%
Adjusted OR %	94.2%	96%	(1.8%)
Adjusted earnings per share	$1.04	$1.07	(2.8%)

Key Highlights:

Truckload Revenue: Increased 8.7% YoY to $201.4 million.
Expedited Segment: Revenue up 3.8% YoY to $108 million.
Dedicated Segment: Revenue up 15% YoY to $93.4 million.

"Covenant showed consistently strong financial performance over the duration of a very weak general freight market," David Parker, Covenant's CEO, emphasized.

Knight-Swift Q2 Earnings: Spotting Stability

Mixed Results: Knight-Swift (KNX) reported Q2 adjusted EPS of 24 cents, below expectations. However, truckload revenue soared 33% YoY due to the U.S. Xpress acquisition.

Knight-Swift Transportation	Q2/24	Q2/23	Y/Y Gross Change	Y/Y % Change
TL:
Revenue (ex fuel)	$1,102.8M	$829.4M	$273.4M	33.0%
Average Tractors	22,828	17,851	4,977	27.9%
Miles/Tractor	20,518	18,904	1,614	8.5%
Deadhead %	14.0%	15.2%	-120 bps	-7.9%
Loaded Miles/Tractor	17,645	16,031	1,615	10.1%
Loaded Miles	402,811,017	286,162,098	116,648,920	40.8%
Revenue per Loaded Mile (ex fuel)	$2.74	$2.90	-$0.16	-5.5%
Revenue/Tractor (ex fuel)	$48,309	$46,461	$1,848	4.0%
Average Length of Haul	385	385	0	0.0%
Adjusted OR %	97.2%	91.8%	540 bps	5.9%

Strategic Moves:

Fleet Optimization: Improved asset utilization and reduced excess equipment.
LTL Expansion: Opened 11 new terminals in Q2, planning 20 more by year-end.

"We don’t want to be too quick to call it but I think we’re cautiously optimistic that certainly the trough is behind us and we’re on our way to building back," CEO Adam Miller stated, “Again, we don’t want to sit here and call the inflection. Again, we saw positive signs (…), we can’t call it a trend yet. But we’ve seen this market move rapidly."

What's Next?

Despite the mixed financial results, these logistics giants are adapting to market conditions with strategic debt reduction, fleet optimization, and expansion efforts. The freight market shows signs of stabilizing, offering a glimmer of hope for the industry.

Sources: Thomas Wasson (Heartland) | FreightWaves (Covenant) | FreightWaves (Knight-Swift) | The Load Star