Stock Story -
Freight delivery company Heartland Express (NASDAQ:HTLD) fell short of the market’s revenue expectations in Q3 CY2024, with sales falling 11.9% year on year to $259.9 million. Its GAAP loss of $0.12 per share was also 1,027% below analysts’ consensus estimates.
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Heartland Express (HTLD) Q3 CY2024 Highlights:
- Revenue: $259.9 million vs analyst estimates of $268.4 million (3.2% miss)
- EPS: -$0.12 vs analyst estimates of -$0.01 (-$0.11 miss)
- EBITDA: $37.82 million vs analyst estimates of $47.24 million (19.9% miss)
- Gross Margin (GAAP): 27.3%, up from 25.3% in the same quarter last year
- Operating Margin: -2.7%, in line with the same quarter last year
- EBITDA Margin: 14.6%, in line with the same quarter last year
- Market Capitalization: $893.3 million
Company OverviewFounded by the son of a trucker, Heartland Express (NASDAQ:HTLD) offers full-truckload deliveries across the United States and Mexico.
Ground Transportation
The growth of e-commerce and global trade continues to drive demand for shipping services, especially last-mile delivery, presenting opportunities for ground transportation companies. The industry continues to invest in data, analytics, and autonomous fleets to optimize efficiency and find the most cost-effective routes. Despite the essential services this industry provides, ground transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.Sales Growth
Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Luckily, Heartland Express’s sales grew at an excellent 13.4% compounded annual growth rate over the last five years. This is a useful starting point for our analysis.We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Heartland Express’s annualized revenue growth of 19.1% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. Heartland Express recent history stands out, especially when considering many similar Ground Transportation businesses faced declining sales because of cyclical headwinds.
This quarter, Heartland Express missed Wall Street’s estimates and reported a rather uninspiring 11.9% year-on-year revenue decline, generating $259.9 million of revenue.
We also like to judge companies based on their projected revenue growth, but not enough Wall Street analysts cover the company for it to have reliable consensus estimates.
Operating Margin
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling them, and, most importantly, keeping them relevant through research and development.Heartland Express has done a decent job managing its cost base over the last five years. The company produced an average operating margin of 9.7%, higher than the broader industrials sector.
Analyzing the trend in its profitability, Heartland Express’s annual operating margin decreased by 14.3 percentage points over the last five years. Even though its margin is still high, shareholders will want to see Heartland Express become more profitable in the future.
This quarter, Heartland Express generated an operating profit margin of negative 2.7%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth was profitable.Sadly for Heartland Express, its EPS declined by 18% annually over the last five years while its revenue grew by 13.4%. This tells us the company became less profitable on a per-share basis as it expanded.
We can take a deeper look into Heartland Express’s earnings to better understand the drivers of its performance. As we mentioned earlier, Heartland Express’s operating margin was flat this quarter but declined by 14.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
Like with revenue, we analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business.
For Heartland Express, its two-year annual EPS declines of 47.2% show it’s continued to underperform. These results were bad no matter how you slice the data. In Q3, Heartland Express reported EPS at negative $0.12, up from negative $0.14 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast Heartland Express’s full-year EPS of negative $0.29 will reach break even.