U.S. Xpress shares surge on lowest OR in twenty years

Shares of U.S. Xpress Enterprises, Inc. (NYSE: USX), a Chattanooga-based truckload carrier, surged to $8.90 Friday morning after the company reported its financial and operating results from the fourth quarter of 2018. The share price then settled at about $8.00 by mid-morning, up 3.2 percent from the close on Thursday, February 7.

USX reported operating revenues of $469.2 million for the quarter, an 8.8 percent year-over-year increase. U.S. Xpress’ operating ratio (OR) dropped 160 basis points (bps) year-over-year to 95.5 percent, and the company calculated a non-GAAP adjusted OR of 92.5 percent, a 280 bps improvement compared to the fourth quarter of 2017.

According to GAAP, earnings per share (EPS) came in at $0.14, but USX’s non-GAAP adjusted EPS of $0.39 beat Wall Street’s consensus expectations by $0.03.

“This quarter’s performance represents the sixth consecutive quarter of improvement and is the best adjusted operating ratio that we have delivered in 20 years,” said CEO Eric Fuller in a statement. “Our focus has been to manage the business by core metrics that impact Rate, Truck Count, Utilization and Cost and measure our success by our adjusted operating ratio.”

In USX’s truckload segment, average revenue per tractor per week increased 4.1 percent year-over-year to $3,897 on a more favorable pricing environment (average revenue per mile increased to $2.196 from $2.048 a year ago, while average revenue miles per tractor per week decreased to 1,775 from 1,827 in the fourth quarter of 2017).

While U.S. Xpress’ overall fleet size decreased by five trucks to 6,295, the bigger story was that its over-the-road division shed 192 tractors while the dedicated division added 187 tractors. USX’s guidance for mid double-digit increases in contract rates demonstrated how insulated enterprise carriers with strong dedicated and contract businesses feel from the current downturn in spot rates.

“Market conditions have remained constructive through the fourth quarter of 2018 and into the first quarter of 2019,” Fuller said. “Since October, we have contractually agreed to rate renewals for approximately 20 percent of our anticipated truckload revenue for 2019 with an average rate increase of approximately 7 percent, and we expect full year contract rates to increase between 5-8 percent.”

The brokerage division reported robust top line revenue growth of 16.2 percent year-over-year to $64.9 million, while gross margins contracted to 13.9 percent from 15 percent in the fourth quarter of 2017. USX’s brokerage moved 43,484 loads in the fourth quarter of 2018, up 1.9 percent year-over-year.