Jan. 30–Covenant Transportation on Monday reported that a big benefit from the new federal tax law coupled with higher revenue helped it post sharply better fourth quarter net income over a year ago.
The Chattanooga-based trucking company had net income of $49.3 million, or $2.68 per diluted share in the quarter, compared with $6 million, or 33 cents per diluted share a year ago.
Net income included $40.1 million, or $2.18 per diluted share, of income tax benefit resulting primarily from Covenant’s reasonable estimate of the revaluation of its net deferred tax balances as of last Dec. 31 because of the new tax law.
The trucking company also reported total revenue of $203.3 million in the fourth quarter, an increase of 6.5 percent compared with the same period of 2016. Freight revenue in the quarter came in at $181.6 million, excluding revenue from fuel surcharges, up 4.7 percent compared a year ago.
“Overall, freight demand was strong and trucking capacity was tight during the fourth quarter,” said Covenant Chairman and Chief Executive Officer David R. Parker in a statement after the close of the markets.
Covenant’s stock closed Monday at $29.52 per share, up 46 cents, or 1.58 percent.
Parker also said the demand environment in the last quarter had positive and negative effects on Covenant’s results.
On the positive side, average freight revenue per loaded mile improved by about 2.6 percent in the quarter due to contractual rate increases negotiated earlier in the year for its peak business, he said.
However, with the moderate reduction in the number of teams in its fleet along with the expanded shipping needs of customers, added third-party capacity was required in the 2017 quarter, Parker said.
“This third-party capacity was significantly more expensive during the 2017 quarter,” he said.
For the entire year, Covenant reported total revenue rose 5.1 percent to $705 million.
Net income for 2017 climbed to $55.4 million, or $3.02 percent diluted share, from $16.8 million, or 92 cents per diluted share, according to the company.
Richard B. Cribbs, the company’s executive vice president and chief financial officer, said Covenant is forecasting sequential operating income improvement throughout 2018.
Cribbs said officials believe the combination of an improving economy, tightening truckload supply dynamics, industry regulatory changes including the electronic logging device mandate and its enforcement along with other factors should deliver increased pre-tax earnings for 2018.
In addition, he said, the company expects earnings improvement from the estimated favorable effective tax rate impact from the Tax Cuts and Jobs Act. Cribbs said Covenant is estimating its 2018 effective income tax rate to be in the range of 24 percent to 27 percent.
(c)2018 the Chattanooga Times/Free Press (Chattanooga, Tenn.)
Visit the Chattanooga Times/Free Press (Chattanooga, Tenn.) at www.timesfreepress.com
Distributed by Tribune Content Agency, LLC.