Chattanooga, TN-based truckload carrier Covenant Transport is lowering its third-quarter earnings projections to between 32 and 36 cents per share, down from previous estimates of 36 to 40 cents per share. The carrier cites sluggish freight demand resulting from the hurricanes that affected large areas of the Southeast this season.
“The business environment is good [but] we experienced a soft spot in August that we did not expect from disruption in freight patterns in the Southeast during August and September due to the hurricanes that affected our equipment utilization,” said David Parker, Covenant’s chairman, president & CEO.
Higher fuel costs also hurt Covenant’s earnings, he said, as national average diesel fuel prices increased approximately 30 cents per gallon between July and September. Though the carrier’s fuel surcharge program recovered approximately 70% of that increase, the net impact of higher fuel prices translates into an additional 10-cent per mile hike in truck operating costs.
The company is also taking a $400,000 charge to cover the costs of deductions it took under a tax plan that was later disallowed by the Internal Revenue Service.
Still, Parker said the overall freight outlook remains bright. “In general, July and September were quite good and October has started out strong. For the quarter, we expect revenue per total mile-- excluding fuel surcharges-- to improve more than 10% compared with the same period last year,” he noted.
He added that Covenant expects revenue per tractor per week, excluding fuel surcharge, to improve approximately 2%, to approximately $3,025 for the third quarter.
As a result, his group has formed the national Hybrid Truck Users Forum (HTUF) with the NAC to facilitate the commercialization of hybrid drivelines that would be used in both military and commercial vehicles. Currently, over 50 fleets representing some 1 million trucks are members of the HTUF program.