Trucking Companies Covenant, US Xpress Slide on Do
New York, NY, October 20, 2005--Shares of truckers Covenant Transport and US Xpress headed downhill Wednesday after an analyst downgraded both stocks on the companies' limited ability to offset higher costs.
BB&T Capital Markets analyst John Barnes lowered his ratings on Covenant Transport Inc. and US Xpress Enterprises Inc. to "Underweight," or "Sell," from "Hold" and slashed earnings estimates on both.
The analyst expressed doubt that Covenant can steer a turnaround in the face of accelerating operating costs, namely diesel fuel prices. The same holds true for US Xpress, he said. Moreover, the two companies raised shipping rates significantly in the second half of 2004, curbing their ability to transfer costs to customers this year.
For the third quarter, Barnes cut his per-share earnings estimate to 23 cents from 27 cents on US Xpress and to 8 cents from 10 cents on Covenant. He trimmed estimates further in 2006, to $1.10 from $1.14 on US Xpress and to 43 cents from 61 cents on Covenant.
"The less well-run truckload carriers, including those involved in operational turnarounds -- namely US Xpress and Covenant -- will continue to struggle," he said.
Shares of Covenant fell 98 cents, or 8.9 percent to $10, while shares of US Xpress dropped $1.49, or 13.6 percent, to $9.47 in afternoon trading on the Nasdaq.
Elsewhere, Barnes upgraded Knight Transportation Inc. to "Buy," calling the company the "undisputed heavyweight champion of truckload carriers, in terms of quality and operational efficiency." Knight retains the pricing power to offset its higher costs, he said. Shares of Knight Transportation rose 46 cents to $24.26 on the New York Stock Exchange.
