Heartland Express reports Q3 EPS (12c), consensus (1c)

Reports Q3 revenue $259.9M, consensus $268.44M. CEO Mike Gerdin commented, “Our consolidated operating results for the three and nine months ended September 30, 2024, continue to be hampered by a challenging freight environment. This prolonged recessionary period continues to be driven by a combination of lower freight demand and excess truck capacity in the marketplace. This significant imbalance of supply and demand for trucking services began in the back half of 2022, continued in 2023, and through September 30, 2024 we did not see meaningful or sustained improvements in the freight environment. We believe that the last four quarters of this current freight cycle are arguably the worst four consecutive quarters experienced in the trucking industry over the Company’s 45+ year history. As a result, our trucking assets have been underutilized. However, in October we have begun to see encouraging signs pointing to the early stages of a potential recovery in freight demand, but we do not expect impactful improvement until 2025. During this same period, we have worked to integrate two acquisitions completed in 2022. We have been able to make operational improvements and reduce the acquisition-related debt. During this same period of time, our legacy businesses have also underperformed as compared to our long-term historical expectations but have performed significantly better than the two most recently-acquired entities. For the trailing 4 quarters ending September 30, 2024, our two legacy brands of Heartland Express (HTLD) and Millis Transfer have delivered an operating ratio of 92.3%. This remains above our long-term expected operating ratio target in the low 80’s, but reflects an operating model that we believe is among the best in our industry during current market conditions. For the trailing six months ending September 30, 2024 compared to the previous six months ending March 31, 2024, Smith Transport has improved its operating ratio by 6 percentage points and CFI has improved its operating ratio by 5 percentage points. We have accomplished these results solely by cost measures and business alignment initiatives with no additional assistance from freight market demand improvements. We believe that we will need a meaningful turnaround in the freight environment, and the associated increase in demand for our on-time freight service, in order to improve the utilization of our assets and lower our consolidated operating ratio back to our long-term expectations.”