U.S. Xpress Enterprises (USX) Misses Q1 EPS by 3c, Revenues Miss

U.S. Xpress Enterprises (NYSE: USX) reported Q1 EPS of $0.15, $0.03 worse than the analyst estimate of $0.18. Revenue for the quarter came in at $415.54 million versus the consensus estimate of $445.28 million.

• Operating revenue of $415.4 million compared to $425.7 million the first quarter of 2018
• Adjusted operating revenue increased $2.9 million, excluding the impact of our discontinued Mexico operations and fuel surcharge
• Operating income of $12.6 million compared to $14.9 million in the first quarter of 2018
• Operating ratio of 97.0% compared to 96.5% in the first quarter of 2018
• Adjusted operating ratio1, a non-GAAP measure, of 95.7%, a 40 basis point improvement compared to the first quarter of 2018
• Net income attributable to controlling interest of $4.7 million, or $0.10 per diluted share, compared to $1.2 million in the first quarter of 2018
• Adjusted net income attributable to controlling interest1, a non-GAAP measure, of $7.3 million, or $0.15 per diluted share, compared to $1.2 million in the first quarter of 2018

Mr. Fuller said, “The freight environment was more difficult this year than in the 2018 quarter due to various factors, including inventory levels, weather, and moderately increased truckload supply. Despite the more challenging market, contract rates remained strong, up 8.0% over the 2018 quarter, based on long-term relationships with customers that value our service, technology, and committed baseline capacity. Typically, about 80% of the volume in our Over-the-Road division is contracted while approximately 20% is non-contracted. In the first quarter, the less favorable environment pressured our rates and miles in the non-contract portion of our Over-the-Road Truckload division as spot rates declined more than 20%.”

Mr. Fuller continued, “Despite the more challenging conditions in the spot market which is more aligned with seasonal, project, and cyclical fluctuations, our Truckload segment produced solid revenue performance driven by our Dedicated division which continued to deliver strong performance and helped to lead a 1.1% increase in average revenue per tractor per week across our Truckload segment. Overall, the Truckload segment achieved an adjusted operating ratio of 96.0% for the first quarter of 2019, a 20 basis point improvement compared to the adjusted operating ratio of 96.2% achieved in the first quarter of 2018.”

Outlook

For the balance of the year we are focused on three main priorities. The first is optimizing our Truckload network and resulting average revenue per tractor per week through repositioning equipment and allocating capacity between our Dedicated and Over-the-Road segments. The second is improving the experience of our professional truck drivers, including their safety and security. And, the third is advancing our technology initiatives centered on digital load matching, automated load acceptance and prioritization, and our goal of achieving a 100% frictionless order.

Capitalizing on digital technologies will continue to afford U.S. Xpress competitive advantages. Over time, we expect to achieve driver, cost, and load planning efficiencies as a result of our frictionless order initiatives. In addition, selecting and implementing the right equipment, logistics planning, and automated decision making technologies will further position U.S. Xpress as one of the leaders in our industry. Driving technology development, training, and implementation without losing ground on core operations will be critical to both our success and our goal of delivering enhanced profitability.

Turning to the market backdrop, the second quarter freight environment remains subdued relative to normal seasonality, and in comparison to the strongest market in 20 years which we experienced in the second quarter of 2018. While we expect ongoing improvements in network efficiency from the exit of our Mexico business and in operating efficiency from our strategic initiatives, the change in market conditions since our fourth quarter call has changed our expectations on second quarter earnings. While we continue to expect our initiatives and an improving market backdrop to allow us to improve our adjusted operating ratio on a sequential basis we now expect our second quarter adjusted operating ratio to deteriorate as compared to the year ago comparable quarter.

We believe the operating improvements implemented over the past several years have positioned the Company to better manage market fluctuations such as those that we are now experiencing. Our current guidance of delivering a 93.0% adjusted operating ratio for the full year 2019 remains achievable, though it is dependent on market conditions strengthening through the balance of the second quarter. As a result, we plan to update our full year adjusted operating ratio guidance when we will have better visibility on the freight market and our full year results

For earnings history and earnings-related data on U.S. Xpress Enterprises (USX) click here.

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