Covenant Transportation Group posted record revenue and profits in the third quarter as a strong freight market drove rates higher and the company began to see benefits from its recent acquisition of Landair Holdings.
The Chattanooga, Tenn.-based dry van and refrigerated truckload carrier said net income was $11.6 million, or 63 cents a share, in the three months ended Sept. 30, compared with $4.6 million, or 25 cents a share, in the same period a year ago. Revenue increased 36.2% to $243.3 million in the third quarter of 2018 from $178.6 million in 2017.
“Our historical truckload business has continued to improve year-over-year,” CEO David Parker said in a statement Oct. 23, “and we could not be happier with our first three months of ownership of Landair.”
Landair, a dedicated contract carrier and warehouse operator based in Greeneville, Tenn., was acquired in July for $83 million in cash.
Parker said the transition has gone smoothly and “customer sentiment towards our combined capabilities has been very positive.”
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Landair provided 428 of the 547 trucks added to Covenant’s fleet in the third quarter of 2018 compared with the same period a year ago, and also contributed $18.4 million in new revenue to Covenant’s truckload operations, the company reported.
Average freight revenue per tractor per week increased to $4,159 in the most recent quarter from $3,922 a year ago, while average revenue per total mile jumped 16.4% to $1.967 from $1.689.
Average miles per tractor decreased, in part, because Landair’s dedicated runs are shorter than Covenant’s over-the-road truckload business. The company also reduced the number of team-driven trucks from 967 in 2017 to 880 in 2018. The company also discontinued intermodal freight services in December.
Revenue from Covenant’s managed freight segment, which consists primarily of freight brokerage and warehousing activities, surged 80.9% to $46.3 million in the third quarter of 2018 from $25.6 million in 2017. Operating income nearly doubled to $4.2 million from $2.5 million.
Looking ahead, Richard Cribbs, executive vice president and chief financial officer, said the company expects business conditions to remain favorable through the fourth quarter of 2018 and into next year.
“Freight demand has been, and remains, strong across our business units and indications from our holiday peak season customers indicate robust expectations for the fourth quarter,” Cribbs said.
Attracting qualified truck drivers is the company’s largest challenge.
“Low unemployment, alternative careers and an aging driver population are creating an increasingly competitive environment,” Cribbs explained. “We continue to work actively with our customers to improve driver compensation, efficiency and working conditions while providing a high level of service and generating acceptable financial returns.”
Covenant Transport Services ranks No. 47 on the Transport Topics Top 100 list of the largest for-hire carriers in North America. The company’s operating companies include: Covenant Transport, Southern Refrigerated Transport, Landair Transport and Star Transportation. Covenant Transport Solutions provides freight brokerage and the company owns a 49% stake in Transport Enterprise Leasing, an affiliate that provides equipment sales and leasing services.