Earnings

Covenant's Truckload Fleet Shrinks as Committed Contracts Grow

The Tip Desk · July 29, 2026 · 4 min read

Second-quarter revenue reached $332.9 million and diluted earnings were $0.32 a share, or $0.42 on an adjusted basis.

Covenant Logistics Group (CVLG), a Chattanooga-based truckload and logistics carrier, reported second-quarter revenue of $332.9 million, up from $307.2 million in the first quarter, after a $295.4 million print two quarters earlier. Diluted earnings were $0.32 a share, or $0.42 on a non-GAAP adjusted basis, compared with $0.17 and $0.26 in the prior quarter.

The sequential lift in the top line did not translate into a matching expansion of Combined Truckload margins. Chairman and Chief Executive Officer David R. Parker said the company made constructive changes on the revenue side, but costs disappointed. The operating ratio improved to 97.3% from 98.0% in the first quarter; the adjusted operating ratio improved to 95.9% from 96.6%. Combined Truckload average freight revenue per tractor per week rose 5.9% sequentially to $5,870, and average freight revenue per total mile rose to $2.90 from $2.76. Parker said more than half of the increase in freight revenue per total mile came from a mix shift among business units, with the balance from rate increases.

The fleet continued to shrink. Weighted average Combined Truckload tractors fell 3.3% sequentially to 2,199 from 2,274. Parker said the fleet is expected to hold approximately steady into a stronger market. During the quarter, the company moved about 15% of its Expedited fleet from uncommitted freight to committed contracts, expanded dedicated protein supply-chain exposure, reduced general commodity freight, and implemented rate increases for customers that fell short of profitability requirements.

Expedited total revenue was $93.4 million, up from $84.7 million in the first quarter. Freight revenue excluding fuel surcharge in Expedited was $73.7 million. Weighted average Expedited tractors were 714, down from 860 in the year-ago quarter. President Paul Bunn said the company converted approximately 15% of the Expedited fleet to multi-year committed capacity contracts and reduced a portion of the fleet serving commoditized freight.

Dedicated total revenue was $112.4 million. Freight revenue excluding fuel surcharge in Dedicated was $94.0 million, up 4.3% from a year earlier. Weighted average Dedicated tractors were 1,485. Bunn attributed the Dedicated freight-revenue increase to expansion of agricultural protein-related business and exiting non-specialized dedicated work that had struggled to meet profitability thresholds.

Combined Truckload operating expenses rose about $0.38 per total mile, or 16%, on a non-GAAP adjusted basis, slightly outpacing the 15.1% increase in freight revenue per total mile. Bunn said the mix shift toward a more specialized protein fleet produced fewer miles per tractor and higher cost to serve on a per-mile basis. Parker said maintenance and insurance claims together were about 8 cents a share higher than expectations and historical averages and are not expected to continue at that level. He said that excess more than offset an approximately 3-cent benefit from a lower tax rate and interest income from a compensation plan, neither of which is expected in the third quarter.

Managed Freight freight revenue was $99.5 million, up 28.4% from a year earlier, which the company attributed primarily to assets acquired in the fourth quarter of 2025. The segment operating ratio widened to 98.3% from 94.2% as capacity costs rose faster than revenue per load and a prior-year surge contract was discontinued. Warehousing freight revenue was $26.7 million, primarily from a significant new customer onboarded in the fourth quarter of 2025. The 49% equity-method investment in Transport Enterprise Leasing contributed pre-tax net income of $5.3 million, or $0.16 a share, benefiting from higher equipment sale gains.

Net indebtedness decreased by $6.9 million to about $289.7 million from December 31, 2025, and net indebtedness to total capitalization fell to 41.2% from 42.3%. Cash and cash equivalents were $2.6 million. For the rest of 2026, the company expects net capital equipment expenditures of $50 million to $60 million.

Parker said the company expects a modest sequential increase in earnings per share in the third quarter of 2026 as anticipated operating-margin improvement is partially offset by the absence of higher TEL equipment sales, a lower income-tax rate, and interest income that had benefited the second quarter. He said the goal is to have substantially all asset-based business under long-term dedicated or other committed contracts by the end of the current freight-market upcycle.

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