Covenant Logistics Group optimistic about freight market in 2025
Covenant Logistics Group officials said they anticipate improving market conditions across the freight industry over the next several months.
“I think that the environment is getting better. I think optimism is getting better,” Covenant Logistics Chairman and CEO David R. Parker said during a conference call to discuss fourth-quarter earnings with analysts on Friday.
Chattanooga, Tennessee-based Covenant ( NASDAQ: CVLG ) reported fourth-quarter results after the market closed Thursday.
The company posted total revenue of $277 million in the quarter, a 1% year-over-year increase compared to the fourth quarter of 2023.
“This is the best that I have felt in two and a half years. Something is happening in the market that we’ve all been waiting on for a long time,” Parker said. “I really believe that come March, that we’re going to say freight is pretty good. And by June or July, somewhere in mid-summer, we’re going to say there’s a lot of freight.”
Total freight revenue increased 5% year-over-year to $251 million during the fourth quarter, with truckload operations increasing 3% year-over-year to $190 million.
Freight revenue per tractor per week increased 2% year-over-year to $5,444. Covenant Logistics’ dedicated segment revenue rose 17% to $91.7 million.
Parker said Covenant Logistics has won several new transportation bids in the last three weeks.
“We haven’t done that in two years on that type of volume. I’m seeing more concrete freight that is coming to us. That tells me that if that is happening in January, which as we all know, January, February are the worst two months of the year, that it’s going to get better, Parker said. “I think the economy will get better going forward.”
Related: Covenant Logistics sees growth in freight revenue amid market ‘bottom’
Covenant’s expedited truckload segment revenue decreased 6% year-over-year to $98.6 million, while the managed freight segment saw revenue of $62.2 million in the fourth quarter, a decrease of 5% from the same time last year.
The warehousing segment had revenue of $24.3 million during the quarter, a 1% year-over-year decrease.
Covenant Logistics outlook for 2025 calls for a 2.5% rate increase on 55% of its business and anticipates consolidated earnings growth in 2025.
“We expect consolidated earnings to improve for 2025 compared with 2024 based on the following assumptions,” Tripp Grant, Covenant’s CFO, said. “The fundamentals of the general freight market have improved to a level that is now allowing us to negotiate pricing from a better position than the last two years. Assuming the trend continues, we expect to achieve improved pricing year over year under certain expedited non specialized dedicated and managed freight contracts. The level of increase is expected to build throughout the year as contracts renew.”
Challenges from disruptions in the poultry industry impacted the company’s dedicated fleet segment’s performance during the quarter, Parker said.
In April 2023, Covenant Logistics acquired Huntsville, Arkansas-based Lew Thompson & Son , a trucking company primarily involved in poultry-related freight movement.
“In the year and a half of being in the poultry business, avian influenza is not good. And it will continue to hurt for about another 60 days,” Parker said. “Avian influenza has been stationary in just a couple of regions of the country. For us, it’s been a couple of farms here and a couple of farms there. I think we still have another four or five weeks and then things will be back to normal, hoping and praying that avian influenza stays normal.”
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