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• Covenant Express Lowers 2Q Outlook

Covenant Express Lowers 2Q Outlook

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Covenant Express, Chattanooga, Tenn., a leading truckload carrier, is the latest trucker to announce lowered second-quarter earnings guidance.

Covenant said it expects second-quarter earnings to come in a range of 18 to 22 cents a share, well below analysts' 29 cent per share expectations.

Covenant joins Roadway Express and a few other publicly held carriers that are warning investors that the second quarter may be less robust than expected. Covenant Express is the nation's eighth largest truckload carrier, with $547 million in revenues last year. It operates nearly 3,000 power units and almost 8,900 trailers.

Thom Albrecht, trucking analyst for BB&T Capital Markets, said Convenant's mileage utilization (down 3 to 4 percent) and increase in deadhead miles (8 percent instead of 7.5 percent) resulted in lower than earlier guidance.

"With a dependence upon air freight and LTL, sectors with weak trends, it is not surprising Covenant is coming in shy of expectations," Albrecht said in a note to investors.

Still, Albrecht is maintaining a "strong buy" rating on Covenant because of the generally favorable supply and demand situation in the truckload industry. Despite the lowered guidance, Covenant is expected to post a 2 to 3 percent increase in its average rate/loaded mile.

Bear Stearns trucking analyst Ed Wolfe agreed with Albrecht in that he believes Covenant's lower expectations are a "company specific" situation. Both analysts said Covenant has fallen victim to the same general freight weaknesses seen in the air freight and LTL sectors.

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