Heartland Express: ‘Volatile freight demand’ in H2 will exceed available capacity

Heartland Express said Monday demand has stepped down from record levels but remains higher than the available capacity it has.

“Freight demand in the second quarter of 2022 softened sequentially to the first quarter of 2022,” CEO Mike Gerdin stated in a news release. “While the current levels are down compared against the unprecedented levels experienced in the later months of 2021, we continue to have significantly more opportunities to haul freight than we are able to cover with our existing fleet and available drivers.”

The North Liberty, Iowa-based truckload carrier reported second-quarter earnings per share of 97 cents. However, the headline number included a $73.2 million gain on the sale of a terminal in California’s Inland Empire. Excluding the nonrecurring event, adjusted EPS came in at 29 cents per share, 4 cents ahead of the consensus estimate.

Heartland (NASDAQ: HTLD) reported a 22% year-over-year (y/y) increase in revenue to $188 million during the period, 12% higher excluding fuel surcharges. The company does not provide operating metrics for utilization and pricing in its quarterly reports.

The result included a contribution from Smith Transport, which Heartland acquired in June. The deal was immediately accretive to earnings. Smith recorded $200 million in gross revenue during 2021, operating a fleet of approximately 850 tractors and 2,000 dry van trailers.

After adjusting for fuel revenue and the property sale, Heartland recorded a 78.9% operating ratio, 80 basis points better y/y. As a percentage of revenue (excluding fuel), the salaries, wages and benefits, and depreciation and amortization expense lines were more than 300 bps lower y/y. The release also said previously acquired Millis Transfer recorded a sub-80% OR in the quarter. The original goal was for the entity to operate at an 85% OR within its first three years.  

Heartland ended the quarter with $172 million in cash and $46 million in debt and lease obligations following the acquisition.

“Given what we have experienced and based on feedback from our strong group of customers, we expect volatile freight demand throughout 2022 but at volumes that will continue to exceed our available capacity,” Gerdin said.

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