Stock Story -
Freight delivery company Heartland Express (NASDAQ:HTLD) reported results in line with analysts' expectations in Q2 CY2024, with revenue down 10.3% year on year to $274.8 million. It made a GAAP loss of $0.04 per share, down from its profit of $0.10 per share in the same quarter last year.
Is now the time to buy Heartland Express? Find out by reading the original article on StockStory, it's free.
Heartland Express (HTLD) Q2 CY2024 Highlights:
- Revenue: $274.8 million vs analyst estimates of $275.2 million (small miss)
- EPS: -$0.04 vs analyst estimates of -$0.06 (37.9% beat)
- Gross Margin (GAAP): 28%, down from 29% in the same quarter last year
- Market Capitalization: $985.8 million
Founded by the son of a trucker, Heartland Express (NASDAQ:HTLD) offers full-truckload deliveries across the United States and Mexico.
Ground TransportationThe 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 GrowthA company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Over the last five years, Heartland Express grew its sales at an exceptional 14% compounded annual growth rate. This shows it expanded quickly, 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 32% 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 reported a rather uninspiring 10.3% year-on-year revenue decline to $274.8 million of revenue, in line with Wall Street's estimates. 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 a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Heartland Express has managed its expenses well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 10.7%.
Analyzing the trend in its profitability, Heartland Express's annual operating margin decreased by 14.5 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.
In Q2, Heartland Express's breakeven margin was down 5.2 percentage points year on year. Since Heartland Express's operating margin decreased more than its gross margin, we can assume the company was recently less efficient because its general expenses like sales, marketing, and administrative overhead increased.
EPS Analyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Sadly for Heartland Express, its EPS declined by 18.2% annually over the last five years while its revenue grew by 14%. This tells us the company became less profitable on a per-share basis as it expanded.
Diving into the nuances of Heartland Express's earnings can give us a better understanding of its performance. As we mentioned earlier, Heartland Express's operating margin declined by 14.5 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 also analyze EPS over a shorter period to see if we are missing a change in the business. For Heartland Express, its two-year annual EPS declines of 47.4% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.
In Q2, Heartland Express reported EPS at negative $0.04, down from $0.10 in the same quarter last year. Despite falling year on year, this print easily cleared analysts' estimates. Over the next 12 months, Wall Street is optimistic. Analysts are projecting Heartland Express's EPS of negative $0.30 in the last year to reach break even.
Key Takeaways from Heartland Express's Q2 ResultsWe were impressed by how significantly Heartland Express blew past analysts' EPS expectations this quarter. Overall, we think this was a really good quarter that should please shareholders. The stock remained flat at $12.42 immediately following the results.
