Heartland Express Books Another Net Loss

On Tuesday, the North Liberty, Iowa-based truckload carrier reported a 19-cent-per-share loss for the period, 7 cents worse than the consensus estimate and 35 cents worse year over year (y/y). This was the company's third straight net loss when excluding one-time gains from the sale of real estate. (It booked $25.6 million in gains from the sale of three terminals in the fourth quarter.)

During the first quarter, Heartland recorded a small loss on the disposition of equipment. Compared to the year-ago period, the line item was a 7-cent headwind.

Revenue fell 18% y/y to $270 million but was down just 2% from the fourth quarter. The company does not provide operating metrics for utilization and pricing.

Like other carriers have reported, Heartland is refusing to budge in rate negotiations and is working to cull unprofitable freight from the network.

"We worked to reduce unprofitable freight, did not rely on broker freight, and refused to lower our freight rates to meet the unsustainable requests of certain customers, all of which had a negative impact on our revenues in comparison to the same period of the prior year" CEO Mike Gerdin said in a news release.

Table: Heartland's key performance indicators

Heartland reported a 105.6% adjusted operating ratio, which was 1,420 basis points worse y/y but on par with the fourth-quarter result (excluding the real estate gains). Salaries, wages and benefits expenses (up 440 bps as a percentage of revenue), depreciation and amortization expenses (up 260 bps), and insurance and claims expenses (up 210 bps) increased the most in the period.

Heartland has struggled to integrate two large acquisitions made in rapid succession in mid-2022, shortly after the onset of a freight recession. It normally provides an OR breakdown for recently acquired fleets — Contract Freighters Inc. and Smith Transport — as well as its legacy operations, but didn't in the Tuesday update.

It said it continues to work on cost reduction and other efficiency initiatives to eventually move the combined operation to an 85% or better OR. It noted sequential improvement in revenue and OR in each month of the first quarter, however, severe winter storms in January provided a low starting point, meaning the month-over-month improvements may be no better than normal seasonal trends.

Heartland generated $31 million in cash flow from operations during the first quarter. It has reduced its debt load (including financing lease obligations) by nearly half to $264 million since the acquisitions closed. It has $24 million in cash and an untapped credit line with $88 million in available borrowing capacity.

"We continue to believe that the freight market will improve as more capacity exits the market so the industry as a whole can return to more disciplined operating decisions and improved financial results" Gerdin said.

Shares of HTLD were up 1.5% Tuesday compared to the S&P 500, which was up 1.2%.

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