Covenant Logistics’ third quarter underscored how prolonged overcapacity is still pinching midsize truckload carriers. The Chattanooga-based company posted GAAP earnings of $0.35 per share on $296.9 million in revenue, with adjusted EPS of $0.44—matching consensus—even as profits fell year over year. The mix was clear: asset-light held steady while truckload margins deteriorated.
Within truckload, expedited took the brunt of the slowdown as fewer seated tractors and lower utilization dragged revenue down 8% from a year ago. Dedicated grew low double digits on tractor additions and higher revenue per mile, but start-up costs and shorter hauls diluted profitability. Segment operating ratios worsened across the combined truckload book, with adjusted OR climbing into the mid-90s.
The cost stack moved the wrong way. Insurance and claims expense rose roughly a quarter per mile versus last year due to several large claims, recruiting and onboarding costs increased as seating equipment got tougher, and unproductive equipment drove up maintenance and depreciation. Management also flagged the broader litigation environment (“nuclear” awards) as a continuing risk to expense volatility.
Liquidity remains solid but leverage ticked up as Covenant continued to reshape the portfolio. Net indebtedness reached about $268 million, or 38.8% of total capitalization, reflecting tuck-in acquisition payments and roughly $36 million of share repurchases year to date. Fourth-quarter net capex is planned at $15 million to $20 million, and the average tractor age edged up to 23 months.
Guidance skews cautious. Management expects fourth-quarter adjusted EPS to be sequentially lower, citing: credit losses at its 49% affiliate Transport Enterprise Leasing as small-carrier bankruptcies persist; an anticipated hit to Department of Defense work tied to the federal government shutdown; heavier claims accruals; and the loss of a large Managed Freight customer rolling off faster than the ramp at Star Logistics Solutions. Any seasonal bump in expedited and brokerage is unlikely to offset those headwinds.
The competitive backdrop supports that caution. On the same day, Knight-Swift reported results that missed on earnings and reflected an elevated operating ratio, a reminder that truckload margins remain thin industrywide heading into peak.
What it means for carriers: Covenant’s playbook—modestly contracting its truckload fleet, steering capital to dedicated niches and warehousing, and pruning underperforming contracts—tracks the cycle’s late stage. Accelerating small-carrier exits and tighter driver availability could eventually firm utilization and pricing, but in the near term, carriers face higher per-mile costs (insurance, recruiting, equipment) and choppy used equipment markets if they choose to downsize. For operators with exposure to government freight or large brokerage accounts, contract timing and federal disruptions add another layer of quarter-to-quarter volatility.
Sources: FreightWaves, GlobeNewswire, Nasdaq, Knight-Swift Investor Relations
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