The wave of first quarter earnings reports from the nation’s publicly owned fleets continued on Wednesday, with three out of four lower than a year earlier due mainly to less freight to move.
Saia Net Income Drops 16%
The less-than-truckload carrier Saia Inc. (NASDAQ: SAIA) was unable to match last year’s record first-quarter profit, with net income falling 16% to $10.6 million.
Earnings per share were 42 cents, down from 49 cents in the first quarter of 2015, but 2 cents better than Wall Street expectations. Revenue totaled $290 million, a drop of 1.1%.
“We continue to see benefits in the areas of dock productivity and maintenance expenditures, while maintaining service and advancing quality initiatives," said President and CEO Rick O'Dell. "We also reduced purchased transportation expense, which represented 4.3% of revenue compared to 6% of revenue in the first quarter last year. Despite no noticeable improvement in the level of general economic activity, we secured average rate increases of 5.3% on contractual renewals in the period.”
According to figures released by the Georgia-based fleet, LTL shipments per workday fell by 0.8% in the first quarter from a year ago, while LTL tonnage per workday declined 3.4% but LTL revenue per hundredweight increased 2.1%.
According to an analyst note from the investment banking firm Stifel, Saia beat out the consensus estimate of 40 cents per share due mainly to better-than-expected freight volume. However, looking ahead, it said, “We expect Saia's top-line growth to remain challenged, as our 2016 economic outlook is for little growth, and the oil/gas sector is still weak.”
Patriot Transportation Returns To Profit
In contrast, Patriot Transportation Holding Inc. (NASDAQ: PATI), the parent to liquid and dry bulk hauler Florida Rock and Tank Lines, moved to a profit from a loss in the first three months of this year.
The company reported net income of $863,000, or 26 cents per share, compared to a net loss of $351,000, or a loss of 11 cents per share, a year earlier.
According to the company, the loss in the first quarter of 2015 was mainly due to just over $2 million from an intangible asset impairment charge. This made for adjusted income of $863,000 in the current quarter compared to $914,000 in the 2015 quarter.
Total revenues for the most recent quarter were $29 million, down 2.3% as fuel surcharge revenue fell by $2.1 million. Revenue excluding fuel surcharges increased 5.2% to $28.5 million due to 117,000 more revenue miles, an increase of 4.1% versus the same quarter last year.
“We have been successful the past several quarters in growing our per mile transportation revenue while adding revenue miles through new business opportunities,” the company said in a statement.
It also noted during the first quarter it was successful in adding some new business opportunities and obtaining commitments on others.
Compensation and benefits increased $979,000 from a year ago. The company said with the current shortage of qualified drivers, it "strategically invested" in growing its driver count to levels higher than current demand, "to position ourselves for opportunities we felt would arise during the seasonally busier spring and summer months."
Covenant Transport Profit Plunges Nearly 63%
Covenant Transportation Group Inc. (NASDAQ:CVTI) reported a big drop in earnings from a year ago, falling 62.7% to $3.8 million.
This translates to a profit of 21 cents per share, 2 cents better than a consensus estimate from Zacks Investment Research, but down sharply from 56 cents in the first quarter of 2015.
According to the Tennessee-based company, part of the reason for the big decline compared to last year is that net income and earnings per share for the first quarter of 2015 included a federal income tax credit of approximately $4.7 million.
Revenue in the most recent quarter totaled $156.3 million, a decrease of 6.5% compared to the first quarter of 2015. Revenue minus fuel surcharges increased 0.9% to $144.7 million.
““Our team did a solid job executing in a difficult freight environment during the first quarter,” said Chairman and CEO David R. Parker. “From a profitability perspective, operating income declined by approximately $2.6 million compared with the record first quarter of 2015. The main factors contributing to the decline were a $1.9 million increase in losses on fuel hedging contracts and an approximately $1.7 million negative impact on depreciation expense due to accelerating the depreciation on tractors scheduled for sale and lower gain on sale of tractors sold during the quarter."
In the company’s asset-based truckload operations, total revenue was $142.8 million, a drop of $14.5 million compared with the first quarter of 2015.
“This decrease consisted of a $2.3 million reduction of freight revenue, along with lower fuel surcharge revenue of $12.2 million,” Parker said. “The $2.3 million decrease in freight revenue related to a 79-truck, or 2.9%, decrease in our average tractor fleet, partially offset by a 0.5% increase in average freight revenue per tractor and a $900,000 increase of freight revenue contributed from our refrigerated intermodal service offering.”
Covenant said average freight revenue per tractor per week decreased to $3,721 during the 2016 quarter from $3,743 during the 2015 quarter. Average freight revenue per loaded mile increased by 5.1 cents per mile, or 2.9%. Also, average miles per tractor decreased by 1%.
“The main factor impacting the decreased utilization was a weaker overall freight environment, partially offset by a 300-basis point increase in the percentage of our fleet comprised of team-driven trucks, and a higher seated truck percentage,” Parker said.
In Covenant’s non-asset based brokerage and other operations, total revenue increased 36.3%, to $13.6 million. Operating income was approximately $1.8 million for an operating ratio of 86.6%, compared with operating income of approximately $300,000 and an operating ratio of 96.6% in the first quarter of 2015.
According to Richard B. Cribbs, executive vice president and chief financial officer, Covenant’s outlook for the second quarter of 2016 is cautious given the near-term freight environment.
“General freight levels have been soft in April, and many of our customers are not predicting improvement in their shipping levels until the second half of the year," he said. "We currently expect earnings per diluted share to be in a range of 28 cents to 33 cents for the second quarter of 2016. For the second quarter of 2015, we reported earnings per diluted share of 60 cents.”
Cribbs explained part of the difference for lower expectations is a year ago there were proceeds from an insurance policy Covenant received, while net fuel cost in the current quarter is expected to be higher.
Celadon Net Incomes Falls Almost 38%
Profit was also lower for the truckload and logistics provider Celadon Group Inc. (NYSE : CGI), falling 37.5% in the second quarter from a year ago to $5.2 million.
Earnings per diluted share fell even more, 47.2%, to 19 cents from 36 cents for the same quarter last year, following a 16.6% increase in weighted average diluted shares resulting mainly from the company's public offering of 3.5 million common shares of stock sold in May of 2015. The performance was 3 cents less than Wall Street expectations.
The lower net earnings came as revenue for the quarter increased 12% to $259.6 million while freight revenue moved 18.9% higher to $239.9 million.
CEO Paul Will said the company faced weaker freight volumes and pricing pressure during the quarter. It's focusing on four key business initiatives: moving to more dedicated and committed customer freight, increasing its asset-light model, creating more lane density in core operating lanes, and increasing the brokerage portion of its business in lanes that do not create lane density.
“We have seen improvement in several of our key operating statistics sequentially as a result of this increased focus.”
He said this includes reducing the average seated line haul tractors by 232 tractors to 5,082 in the first quarter from 5,314 in the final quarter of last year.
Celadon’s average revenue per tractor per week decreased 7.6%, to $2,804 in the March 2016 quarter, from a year earlier, due to a lackluster freight environment coupled with the significant growth in its seated tractor count year-over-year, according to Will.
“However, our average revenue per tractor per week increased sequentially by 1% from $2,775 in the December 2015 quarter,” he said. “We have continued to increase our customer freight to better align with our increased fleet size."
Will said this has already resulted in an increase in average miles per seated tractor per week by 2.6%, to 1,749 in the most recent quarter from a year earlier.
During the quarter Celadon also significantly increased the number of dedicated trucks and trucks committed to specific customers during the quarter to 1,792 at the end of March 2016, from 1,330 a year ago.
“We believe this will allow us to continue to generate more consistent earnings levels in future quarters with this movement of our equipment into this portion of our service offering,” Will said.