Covenant projects weak 2Q results

Chattanooga, TN-based truckload carrier Covenant Transport said it expects to post very weak earnings for second quarter of 2005. At just two to three cents per share, earnings will be down considerably compared to the same period last year, when they came in at 30 cents per share.

“The main factor affecting the quarter is a continuation of softer than expected freight demand,” said Covenant’s chairman & CEO David Parker. “Other than a brief period of increased demand in late April and early May, our customer demand has not improved to the seasonal level we expected or needed. This is contributing to lower than planned tractor productivity, though we are continuing to work diligently to recapture some of the freight we lost during the winter and solicit new business.”

He noted that for the second quarter, equipment utilization, or miles per tractor, is expected to be down 8% to 9% overall versus the same period last year.

“Though our average freight revenue per total mile, which excludes fuel surcharges, is expected to increase approximately 8% compared with the second quarter of 2004, that is approximately 1% per mile less than we had planned,” Parker said. “Both freight revenue per tractor per week and total freight revenue are expected to be down approximately 1% versus the same quarter last year.”

Covenant expects its after-tax cost per mile to increase approximately 10% when compared to the second quarter of 2004, due primarily to higher driver pay, increased fuel costs and a decrease in total miles.

“The increase in fuel costs, net of fuel surcharge collections, is expected to affect our earnings by approximately six cents per share versus the second quarter of 2004 and 10 cents per share versus our prior expectation,” Parker said. “Based on our current freight demand and expected results for the quarter, we are withdrawing all prior guidance concerning goals and expectations for periods beyond the second quarter of 2005.”

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