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Heartland Express Inc. reported a 23.6% drop in first-quarter net income to $13.2 million, or 16 cents per share, from $17.3 million, or 21 cents, in the same period a year ago.
The slide was driven primarily by $4.1 million less gains on sale of revenue equipment in 2020, the company said April 23.
On an operating basis, income for the three-month period ended March 31 decreased $3.5 million primarily due to lower gains on sale of revenue equipment partially offset by the operating income of Millis Transfer, the company said.
The North Liberty, Iowa-based truckload company’s operating revenue, however, gained 19.2% to $166.3 million from $139.5 million in the same year-ago quarter.
The results beat expectations by investment analysts on Wall Street, which had been looking for 13 cents per share and revenue of $165.7 million, according to Zacks Consensus Estimate.
Operating revenue included fuel surcharge revenue of $19.5 million compared with $17 million.
Excluding the fuel surcharge, operating revenue rose 19.9%.
CEO Mike Gerdin said the operating results show operating efficiency in a quarter that has bogged down in an economy struggling with the coronavirus pandemic.
“We believe Heartland Express is well-positioned to navigate a volatile freight market, changing customer needs and relationships, and an uncertain economic landscape in the months ahead,” Gerdin said. “We thank the truck drivers of America for keeping the flow of critical goods moving during this challenging time.”
Net cash flows from operations in the quarter were $40.1 million (24.1% of operating revenue) which was primarily used for equipment transactions, terminal projects and stock buybacks.
The company said the average age of its tractor fleet was 2 years old at the quarter’s end compared with 1.4 years old last year. The average age of its trailer fleet was 3.8 years compared with 3.5 years the year before.
During the quarter, Heartland Express purchased 710,376 shares of its common stock for $12.3 million. Outstanding shares at the time were 81.3 million.
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Heartland Express posted an operating ratio of 89.6% during the first quarter. The company expects to record gains on sale of revenue equipment of approximately $10 million to $12 million later this year.
Wolfe Research noted that revenue and margins were both better than expected. Its report found that when applying a revised earnings per share estimate of 85 cents, its target price implies modest downside from current levels. Wolfe therefore retains the company’s relative underperform rating.
“While HTLD generates strong margins, returns and cash flow through a cycle, it also generates below-average revenue and earnings growth,” Wolfe Research analyst Scott Group said in the report. “So we don’t believe its growth multiple relative to peers is warranted.”
The Wolfe report also noted that when it comes to cost the company reported a small loss on sales during the quarter for the first time since 2008. But this was offset by a $3 million sequential drop in depreciation expense that drove the majority of the margin to beat its model.
The Millis Transfer acquisition makes underlying trends difficult to read, the report from Wolfe Research also stated. But relative to prior acquisitions, revenue retention has been better than the financial research firm expected so far.
Heartland Express ranks No. 57 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
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