Covenant Transportation reports strong Q1 growth

Covenant Transportation has announced its financial results for the first quarter ended March 31, 2015. It reported revenue of $167.2m, an increase of 3.9% compared with the first quarter of 2014. The company also reported operating income of $10.0m, a sharp increase of 2,400% from a low base of $0.4m in Q1 2014. Accordingly Covenant Transportation’s margin stood at 5.98%.

The company’s asset based operations, which make up the bulk of revenue, recorded solid growth year-on-year. This was largely the result of an increase in fleet size accompanied by an improvement in utilization rates. The revenue contribution of asset based operations was partially offset by lower fuel surcharges.

The improvement to operating income resulted from higher utilization within the fleet combined with lower costs per mile attributed to more efficient vehicles, better use of drivers, lower capital costs and investment following the company’s public offering in November 2015. These cost improvements were partially offset by higher depreciation expense of $1.3m for more expensive tractors and an updated trailer fleet, net of an approximately $0.6m increase in gain on sale of assets.

The company’s Chairman and Chief Executive Officer, David Parker said “We continue to invest in new, more fuel-efficient equipment that offers dependability, lower operating costs, improved safety technology, and improved driver satisfaction. The younger fleet of tractors and trailers also contributed to an approximately 2.7 cent per mile reduction of our operations & maintenance expense for the 2015 quarter as compared to the 2014 quarter.”

The company’s non-asset based subsidiary, Covenant Transport Solutions, fared less well in Q1. It saw total revenue decrease by 6.9% from Q1 2014 to $10.0m. Operating income also fell by 37.71% year-on-year to approximately $337,000.