Heartland Express profit beats expectations but operating revenue misses estimates

Heartland Express, Inc. (NASDAQ: HTLD) announced a first quarter 2019 profit of $0.21 per share, which was $0.02 ahead of analysts’ estimates.

The truckload (TL) carrier generated $139.5 million in revenue from operations, down 11 percent year-over-year (y/y), missing analysts’ revenue expectations by $7.9 million.

“Our operating revenue results during the first quarter of 2019 were challenged by severe weather over multiple weeks which included safety shutdowns for our drivers and impacted customer operations and shipping patterns,” said HTLD’s Chief Executive Officer Michael Gerdin in the company’s release.

HTLD reported a revenue decline of 9.4 percent y/y excluding the impact of fuel surcharge revenue and noted that miles driven were lower on a y/y basis in the quarter.

“We have experienced general softness in the overall freight environment during the first quarter of 2019 as customer demand to date in 2019 has been less than that over the same period of 2018” said Gerdin.

The company reported operating income of $20.8 million, a 61 percent y/y increase. HTLD’s operating ratio (OR) was 85.1 percent, an improvement of 660 basis points compared to the first quarter of 2018. Additionally, HTLD’s OR was 83 percent excluding the impact of fuel revenue and expenses.

The release made no reference to the improvement in margins on a y/y comparison. However, improved contractual pricing likely played a role in the result, potentially similar to the improved pricing results seen so far this earnings season by Marten Transport (NASDAQ: MRTN), P.A.M. Transportation (NASDAQ: PTSI) and J.B. Hunt’s (NASDAQ: JBHT) TL division.

While TL spot rates are down (DAT Van Freight Rate Index, National U.S. Van – SONAR:DATVF.VNU) because of the impact of excess capacity and lower demand, larger carriers, which derive the bulk of their revenue from contracts, are still enjoying TL rates negotiated in 2018 when capacity was much tighter and spot rates soared.

Additionally, Heartland’s first quarter was favorably impacted by a nearly $1 million increase in gains on equipment sales (typically the trade-in of trucks and trailers) which likely had a positive impact of $0.01 per share.

HTLD said that it plans $80 million to $100 million in capital expenditures in 2019 as it continues to maintain a tractor fleet with an average age of 1.4 years.

The company ended the quarter with $176.3 million in cash on the balance sheet, no debt and an open stock repurchase authorization allowing it to repurchase an additional 6.9 million shares.

“We continued to refresh our fleet of tractors and trailers as well as several of our terminal locations as we look to provide the latest equipment and terminal amenities to our professional drivers while remaining debt-free. I am pleased with our drivers, our team that supports our drivers, and our financial results for the first quarter of 2019,” concluded Gerdin.