Another set of strong earnings and another bullish move on Wall Street in reaction. USA Truck, Inc.'s (NASDAQ: USAK) quarterly earnings set several records and the reaction Tuesday was double-digit gains percentage-wise.
At the close, USA Truck was up $2.04 to $20.46, a gain of 11.07 percent. While some operating metrics at USA Truck declined, the top and bottom lines were solid. Consolidated operating revenue was $141.1 million for the 2018 quarter, a gain of 14.5 percent, and consolidated operating income was up to $8.7 million from $5.5 million in the corresponding quarter of 2017. Earnings per share of 68 cents per diluted share were the highest in the company's history, and its consolidated adjusted operating ratio of 92.8 percent was an improvement of 220 basis points over 2017.
The biggest area of operating improvement came in base revenue per loaded mile, which came in 12.1 percent more than 2017, rising to $2.361 from $2.106. Base revenue per available tractor per week rose less than 1 percent, to $3,447 from $3,417. James Reed, USA Truck's CEO, said in a conference call with investors that the small rise in that benchmark was part of a strategy. "(K)eep in mind that the $30 year-over-year improvement in revenue per tractor per week was achieved on 10 percent less utilization, our loaded miles per truck per week," Reed said, according to a transcript of the conference call provided by SeekingAlpha. "This was a strategic decision towards the more profitable model. Higher revenues on lower miles and thus lower cost translates to higher profits." There might have been fewer miles, but there were more loads; the load count for USA Truck was 27,300, up from 24,000 for the corresponding quarter of 2017.
In a note to investors, Jason Seidl of Cowen said the positive earnings per share in all four quarters of the year posted by USA Truck was something that had occurred only once before in its history. "USAK remains one of the few trucking stocks we rate Outperform," Cowen said.
The strong performance of the company was not just a function of steps the company took internally. Woods said USA Truck, like many, "heard concern about a softer market in December, our data just doesn't reflect that." The quarter started strong, and December was only "seasonally soft, but historically in line with expectations." Spot pricing was recorded by the company's logistics business, but he said USA Truck is not "highly dependent on the spot market." And things are continuing strong into January. "The first quarter of this year started off seasonally slower than expected, but the last half of January was strong," Woods said on the conference call. "So much so that in the last week of January, we saw load count in demand nearly back to pre-holiday levels. These recent trends cause us to feel encouraged by the current state of the market."
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Regarding USA Truck's dependence on the spot market, Cowen said the company's logistics business had been affected by declining spot rates, but only 50 percent of the business is spot, "with management noting that they'd like to maintain the 50/50 spot and contract split." In other pricing developments, Cowen's view (drawn from the earnings statement, the conference call and pre-earnings calls with a private truckload company) is that USA Truck's pricing reflects recent bid awards of 5 to 7 percent for contract business "above the rates that some of the other TL [truckload] companies have reported but in line with some of the asset-based representatives on our pre-earnings private TL conference call." By point of comparison, rates were up 20 percent in the first three quarters of 2018 and a 12.1 percent jump in the fourth quarter.
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