U.S. Xpress Has Tough Quarter, Improvement On The Horizon

Chattanooga-based truckload (TL) carrier U.S. Xpress USX reported adjusted earnings per share of $0.06, worse than the consensus estimate of $0.12.

USX reported operating revenue of $413.9 million for the quarter, an 8 percent decline year-over-year. Revenue excluding fuel surcharge was down a similar percentage at $371.2 million. Adjusted operating income was 64.8 percent lower at $9.3 million. The adjusted operating ratio (OR) deteriorated 410 basis points to 97.5 percent, which was in-line with the company's updated guidance. The company's adjusted net income of $2.9 million was roughly one-quarter that of the same period in 2018.

The carrier lowered its outlook for the year three weeks ago. On July 11, USX issued a press release stating that its second quarter 2019 OR would be approximately 97.5 percent compared to the prior guidance, which called for sequential improvement from the 95.7 percent mark reported in 2019's first quarter. Additionally, the company took the 93 percent OR target by year- end off the table, replacing it with a range of 95.5 percent to 97.5 percent, citing a lack of seasonal improvement and excess truck capacity as the reasons.

"The freight market remained challenging through the second quarter driven by weaker than seasonal demand combined with capacity growth as a result of more favorable market conditions in 2018. This supply-demand imbalance severely pressured spot pricing through the quarter, which adversely impacted parts of our business," said U.S. Xpress' President and Chief Executive Officer Eric Fuller.

The TL segment reported a 0.8 percent year-over-year decline in average revenue per tractor per week on a consolidated basis. Average revenue per mile increased 0.6 percent to $2.12. The carrier saw an 8 percent increase in contractual rates in the over-the-road (OTR) division, but spot rates declined more than 30 percent in the period. All in, average revenue per mile was down 3.3 percent in OTR, but increased 5.4 percent in dedicated. The TL division reported a 97.6 percent adjusted OR, 490 basis points worse year-over-year.

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The brokerage division reported a 32.4 percent year-over-year decline in revenue at $39.5 million. Load counts declined 29.5 percent and revenue per load moved lower by an undisclosed amount. That said, gross margin for the division improved 390 basis points to 16.1 percent. Brokerage operating income declined 10.1 percent to $1.3 million.

Guidance was left unchanged. "The freight environment has remained under pressure through the summer though we do expect conditions to firm, as capacity slowly exits the market while at the same time we approach a more seasonally busy time of the year. For the full-year 2019, we expect our full-year adjusted operating ratio to be in a range from 95.5 percent to 97.5 percent. To provide context, the high end of our full-year guidance range assumes that the current market environment as experienced through June and July persists through year-end," concluded Fuller.

USX will hold a call to discuss these results with analysts and media at 5:00 p.m. EDT.

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