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Earnings Watch: Swift Beats Expectations, Covenant Numbers Mixed

One of the nation’s largest trucking companies reported improved earnings for the final quarter of last year and beating its expectations for all of 2015 while another publicly held fleet's latest three-month numbers failed to live up to its annual performance.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
January 25, 2016
Earnings Watch: Swift Beats Expectations, Covenant Numbers Mixed

 

5 min to read


Swift Transportation reported improved earnings for the final quarter of last year and beat its full-year expectations, while Covenants's fourth quarter earnings were down.

Swift Transportation Co. (NYSE: SWFT) reported net income of $72.5 million, or 51 cents per diluted share, in the final three months of 2015 compared to $58.5 million a year earlier, or 41 cents per diluted share.

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The share results beat out the company’s earlier expectation of 47 to 51 cents, “driven primarily by strong operational execution, declining fuel prices, gains on sale of equipment, and a better than anticipated tax rate,” the company said in its letter to stockholders. The earnings per share were also more than 12% higher than a estimate from Zacks Investment Research.

Revenue in the latest quarter was $1.09 billion, down 4.4% the final quarter of 2014, but revenue excluding fuel surcharges increased to $996.2 million, a 3.8% improvement

The Arizona-based fleet also reported record adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $196.5 million compared to $195.7 million a year earlier. Its consolidated average operational truck count increased by 490 trucks, or 2.8%, year-over-year in the fourth quarter.

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In the company’s truckload division revenue fell to $557.2 in the latest quarter; however, revenue minus fuel surcharges increased 1% from a year earlier to $503.3 million.

“This revenue growth was the result of a 1.9% year-over-year increase in revenue minus fuel surcharge per loaded mile, partially offset by a 0.9% reduction in loaded miles driven within the period,” the company said.

Swift's dedicated segment saw overall revenue improve from a year earlier to $241.2. Revenue minus fuel surcharge increased from $202.5 million in the final quarter of 2014 to $226 million in the final three months of 2015, an 11.6% improvement.

“This growth was driven by various new contracts that started over the last 12 months, which resulted in a 4.7% increase in our average operational truck count year over year,” Swift said. “Weekly revenue minus fuel surcharge per tractor increased 6.5% to $3,418 primarily due to improved pricing and mix.”

In Swift’s refrigerated operation, overall revenue and revenue minus fuel surcharge fell to $94 million and $82.7 million, respectively. On the plus side, its adjusted operating ratio increased to 95.7% in the fourth quarter of 2015 from 94.4% a year earlier.

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“This increase was primarily driven by the decrease in revenue minus fuel surcharge revenue per loaded mile…and the driver wage and owner-operator pay increases, partially offset by improvements in accident and workers' compensation expense and improvements in driver retention and deadhead,” Swift said.

The company’s intermodal segment saw a decline in overall revenue, but intermodal revenue minus fuel surcharges increased slightly to $90 million in the fourth quarter of 2015 compared to the fourth quarter of 2014. Swift noted a slight increase in revenue minus fuel surcharge per load, but that was partially offset by a slight drop in load counts.

For all of 2015 the carrier saw net income of $197.6 million compared to $161.2 million in 2014, as diluted earning per share increased to $1.38 from $1.12. Total revenue was $3.78 billion in 2014 versus $3.54 billion a year earlier.

For 2016, Swift is projecting adjusted earnings per share of between $1.50 and $1.60.

More details are on the Swift Transportation website.

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Covenant Moves Slightly Lower for Quarter, Up Year-Over-Year

Meantime, Covenant Transportation Group Inc. (NASDAQ: CVTI) saw a slight drop in net income as total revenue moved slightly higher.

The Tennessee-based parent to Covenant Transport and other fleets reported net income of $13.2 million, or $0.73 per diluted share, in the final three months of 2015. That compared with net income of $13.5 million, or $0.82 per diluted share, in the fourth quarter of 2014.

The per share performance matched expectations by Zacks.

Covenant said the performance in its share price was mainly the result of on a 10.7% increase in weighted average diluted shares, resulting primarily from the company’s public offering of 3.036 million common shares completed in November 2014.

Total revenue was $208.1 million, an increase of 0.6% compared with the fourth quarter of 2014. Operating income was $24.3 million in the most recent quarter compared to $24.7 million a year earlier.

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Freight revenue was $191.1 million, which excludes revenue from fuel surcharges, an increase of 10.8% compared with the fourth quarter of 2014.

For all of 2015, total revenue increased 0.7% from 2014, to $724.2 million. Freight revenue increased 10.7%, to $640.1 million, while the company reported net income of $42.1 million, or $2.30 per diluted share, for 2015 compared to net income of $17.8 million, or $1.15 per diluted share in 2014.

“Net income for the fourth quarter was essentially the same as last year in a materially softer overall freight environment," said Chairman, President, and CEO David Parker in a statement.

Parker noted that the company's expedited and brokerage operations "performed very well for the supply chains of our e-commerce, less-than-truckload and omni-channel shipping customers during the 2015 peak freight season.... Our record level of commitment to this peak shipping effort was offset by temporarily ramping up staffing costs to cover the 24/7 nature of this business, softness in other parts of our truckload business, and external market-driven related accruals relating to negative fuel hedge positions and the reduced values of trucks given a softer Class 8 used truck market.”

For the quarter, total revenue in Covenant’s asset-based operations decreased to $176.3 million, or $9.3 million lower than the fourth quarter of 2014. It said this drop consisted of lower fuel surcharge revenue of $17.4 million, partially offset by higher freight revenue of $8.1 million.

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"The $8.1 million increase in freight revenue related to a 2.9% increase in average freight revenue per tractor per week, a 45-truck or 1.7% increase in its average tractor fleet, and a $1.1 million increase of freight revenue contributed from our refrigerated intermodal service offering,” Parker said.

For the quarter, the company’s non-asset based business, Covenant Transport Solutions, reported total revenue increased 49.9%, to $31.8 million from $21.2 million in the same quarter of 2014. Operating income was approximately $3.9 million for an operating ratio of 87.7% in the final three months of last year compared with operating income of approximately $2.3 million and an operating ratio of 89.1% in the fourth quarter of 2014.

In other developments, Covenant said in early August 2015, it purchased its Chattanooga headquarters property, which had been leased since 2006. This single transaction increased the company’s balance sheet debt by approximately $35.5 million. Also in 2015, the company took delivery of approximately 815 new company tractors and disposed of approximately 449 used tractors.

There is more information on the Covenant Transport Group investor relations website.

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