Covenant Logistics reports Q1 adjusted EPS 93c, consensus 81

Reports Q1 revenue $266.9M, consensus $258.1M. Chairman and Chief Executive Officer, David R. Parker, commented: "We are pleased to report first quarter earnings of $1.20 per diluted share and non-GAAP adjusted earnings of $0.93 per diluted share. The primary EPS adjustment excludes approximately $7.6 million in pre-tax gain on sale of a Tennessee-based terminal property in the 2023 quarter. We are also pleased to report the completion of the acquisition of Lew Thompson & Son, a dedicated contract carrier specializing in poultry feed and live haul transportation in Northwest Arkansas and surrounding areas. We believe the acquisition is another strong step toward building a more diversified and resilient operating model. See Subsequent Event: Acquisition for additional information. "The first quarter’s freight market, consisting of a combination of freight rates and volumes, has materially softened compared to a year ago and has remained soft throughout April. Despite these market headwinds, we are pleased with the resiliency in the first quarter’s profitability of our asset-based segments, consisting of Expedited and Dedicated. Our asset-light segments, consisting of Managed Freight and Warehousing, experienced significant deterioration in margin compared to the prior year quarter as a result of reductions in brokerage volumes and rates associated with overflow freight from our asset-based segments. "Our asset-based segments contributed approximately 68% of total revenue, 93% of operating income, 63% of total freight revenue, and 88% of adjusted operating income in the quarter. Our Expedited segment grew revenue modestly, but experienced diminished margins compared to the first quarter last year. Our Dedicated segment experienced reduced revenue with approximately 14% fewer tractors and improved margins year over year. "Our asset-light segments contributed approximately 32% of total revenue, 7% of operating income, 37% of total freight revenue, and 12% of adjusted operating income in the quarter. Compared to a year ago, Managed Freight experienced significant reductions in both revenue and profitability with little to no project related freight in the current quarter. Warehousing was able to grow revenue through new customer startups but had diminished margins primarily due to incremental cost headwinds associated with investments in capacity for future growth in this segment as well as inflationary cost headwinds with existing customers. We are working to increase the operating income and related margins in each of these segments through focused sales efforts within managed freight and proposed customer rate increases with existing customers within Warehousing. "Our 49% equity method investment with Transport Enterprise Leasing ("TEL") contributed pre-tax net income of $5.9 million, or $0.31 per share, compared to $6.8 million, or $0.30 per share, in the 2022 quarter. The decline in pre-tax net income for TEL was primarily a result of a reduction on gain on sale of revenue equipment in the amount of $0.9 million."