Covenant Logistics predicts ‘delay’ in improved freight market

Officials at Covenant Logistics Group said uncertainty brought on by evolving U.S. trade policies could delay a long-awaited recovery to the trucking industry.

Chattanooga, Tennessee-based Covenant (NASDAQ: CVLG) reported first quarter-earnings after the market closed Wednesday. Company officials held a conference call to discuss the results with analysts on Thursday.

“Although we were expecting 2025 to be a year of recovery for the freight economy, we recognize that economic uncertainties may create a delay to an improved freight environment,” CFO Tripp Grant said during the earnings call.

Covenant Logistics posted total revenue of $269.36 million for the first quarter, a 3% year-over-year decrease from the same period in 2024 and short of Wall Street estimates of $278 million.

The company’s first-quarter adjusted earnings were 32 cents per share, 10 cents less than Wall Street estimates of 42 cents.

Freight revenue declined 2% year over year in the first quarter to $243.2 million, while truckload revenue decreased 1% to $188.3 million.

Covenant officials attributed the slowdown to a severe outbreak of avian influenza disrupting its poultry business as well as challenges created by severe weather across the country.

In April 2023, Covenant Logistics acquired  Huntsville, Arkansas-based Lew Thompson & Son, a trucking company primarily involved in poultry-related freight movement.

“There’s some amount of bird flu every year,” Grant said. “Just in talking to the industry folks, this year is probably as bad as any year it has been.”

Grant said the avian influenza shouldn’t affect revenue beyond the first quarter.

“We felt it in the fourth quarter. I would say we felt it in January, February, March; we’re feeling it a little bit in April,” Grant said. “I would say by June, we should be back at 100%. We’re probably at 85% today.”

Company officials said they anticipate growth across their segments over the next several quarters.

The dedicated segment posted revenue of $93.6 million in the first quarter, an 11% year-over-year increase. Revenue in the expedited segment decreased about 10.2% to $94.6 million.

Warehousing revenue declined about 6% year over year to $24 million, while managed freight declined 9.7% year over year to $56.8 million.

“I think we’ll see dedicated margins improve, just like expedited, for a couple reasons,” President Paul Bunn said during the call. “I think the weather significantly affected business in the first quarter. So just with better weather and whatnot, it will help. It will help dedicated. Then, as we continue, the worst of the bird flu will probably be over by January, early February.”

Covenant also recently completed a small tuck-in acquisition of a multistop distribution carrier that is expected to immediately add earnings in the company’s dedicated division. 

Company officials did not disclose any more information about the acquisition.

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