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1. Company Snapshot

1.a. Company Description

Covenant Logistics Group, Inc., together with its subsidiaries, provides transportation and logistics services in the United States.It operates through four segments: Expedited, Dedicated, Managed Freight, and Warehousing.The Expedited segment primarily provides truckload services with high service freight and delivery standards, such as 1,000 miles in 22 hours or 15-minute delivery windows.


The Dedicated segment provides customers with committed truckload capacity over contracted periods using equipment either owned or leased by the company.The Managed Freight segment offers brokerage services, including logistics capacity by outsourcing the carriage of customers' freight to third parties; and transport management services, such as logistics services on a contractual basis to customers who prefer to outsource their logistics needs.The Warehousing segment provides day-to-day warehouse management services to customers.


The segment also provides shuttle and switching services to shuttling containers and trailers.The company also engages in used equipment sales and leasing business.It serves transportation companies, such as parcel freight forwarders, less-than-truckload carriers, and third-party logistics providers; and traditional truckload customers, including manufacturers, retailers, and food and beverage shippers.


As of December 31, 2021, it operated 2,291 tractors and 5,331 trailers.The company was formerly known as Covenant Transportation Group, Inc.and changed its name to Covenant Logistics Group, Inc.


in July 2020.Covenant Logistics Group, Inc.was founded in 1986 and is based in Chattanooga, Tennessee.

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1.b. Last Insights on CVLG

Covenant Logistics Group's recent performance was negatively impacted by economic uncertainties, leading to increased operating expenses and hurting its Q4 earnings. The company's Q4 financial and operating results were affected by these uncertainties, which were reflected in its earnings call. Additionally, the company's recent 2-for-1 stock split may have also contributed to the negative performance.

1.c. Company Highlights

2. Covenant Logistics' Q3 2025 Earnings: Resilient Business Amidst Compressed Margins

Covenant Logistics Group reported consolidated freight revenue of $268.9 million, a 4% year-over-year increase, while consolidated adjusted operating income decreased 22.5% to $15 million. The actual EPS came out at $0.44, slightly below estimates of $0.45. The company's net indebtedness increased by $48.6 million to $268.3 million, yielding an adjusted leverage ratio of approximately 2.1x and a debt-to-capital ratio of 38.8%. The Asset-Based Truckload segment experienced compressed margins, while the Expedited segment's adjusted operating ratio improved 160 basis points year-over-year to 93.6%.

Publication Date: Oct -28

📋 Highlights
  • Revenue & Profitability Shifts:: Consolidated freight revenue rose 4% YoY to $268.9M, but adjusted operating income fell 22.5% to $15M, reflecting margin compression.
  • Debt Increase:: Net indebtedness climbed $48.6M to $268.3M, with an adjusted leverage ratio of 2.1x and debt-to-capital ratio of 38.8%.
  • Segment Performance:: Expedited segment improved its adjusted operating ratio by 160 bps to 93.6%, while Dedicated reached 94.7%, offsetting weaker Managed Freight due to customer loss.
  • Q4 Outlook:: Net CapEx estimated at $70–80M amid soft freight demand and $48.6M in lost DoD revenue from the government shutdown.
  • Market Recovery Drivers:: Anticipated capacity exits from regulatory policies (e.g., non-domicile driver rules) and potential rate hikes in April, with customers expected to accept 17% bid increases since August.

Segment Performance

The Dedicated segment's adjusted operating ratio was 94.7%, while the Managed Freight segment exceeded revenue and adjusted operating income compared to the prior year but fell sequentially due to the loss of a short-term customer. The Warehouse segment experienced freight revenue and adjusted operating income slightly below the prior year quarter. CEO David Parker expressed excitement about the next 2-3 years, citing a constraining of supply and a potential increase in demand due to monetary easing and trade tensions.

Outlook and Industry Trends

The company expects the fourth quarter to remain challenging due to a soft freight market and company-specific factors such as increased claims accruals and the impact of the U.S. government shutdown. However, the company is optimistic about the pace of freight market recovery, driven by government policies concerning English language and non-domicile drivers, which are expected to lead to capacity exits. David Parker mentioned that some small trucking companies may exit the market within the next 30 days due to new policies.

Valuation and Growth Prospects

With a P/E Ratio of 16.56 and an EV/EBITDA of 1.56, the company's valuation appears reasonable considering the current challenges. Analysts estimate next year's revenue growth at -3.0%. The company's focus on cost-cutting and operational leverage is expected to drive future growth. The management team is optimistic about the future, citing a "perfect storm" of positive factors, including demand opportunities, foreign investments, accelerated depreciation, rate cuts from the Federal Reserve, and domestic investment.

Share Repurchase and Capital Allocation

The company has a share repurchase program approved by the Board and will consider options, including M&A, share repurchases, and continuation of dividends. CEO David Parker agrees that shares are highly discounted, with the stock trading at 9x earnings, and the balance sheet in good shape, with debt at just over 2x EBITDA leverage.

3. NewsRoom

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Covenant Logistics Group Announces Quarterly Cash Dividend

Nov -21

Source: globenewswire.com

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Covenant Logistics Group, Inc. (CVLG) Q3 2025 Earnings Call Transcript

Oct -23

Source: seekingalpha.com

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Covenant Logistics Group Announces Third Quarter 2025 Financial and Operating Results

Oct -22

Source: globenewswire.com

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Covenant Logistics Group, Inc. Announces Timing of Third Quarter Earnings Release and Conference Call

Oct -01

Source: globenewswire.com

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Covenant Logistics Group Announces Quarterly Cash Dividend

Aug -15

Source: globenewswire.com

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3 Truck Stocks to Keep an Eye on Despite Industry Hiccups

Aug -08

Source: zacks.com

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Covenant Logistics Group, Inc. (CVLG) Q2 2025 Earnings Conference Call Transcript

Jul -24

Source: seekingalpha.com

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Covenant Logistics Group, Inc. Announces Timing of Second Quarter Earnings Release an Conference Call

Jul -01

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.72%)

6. Segments

Expedited

Expected Growth: 6.5%

Covenant Logistics Group's 6.5% growth is driven by increasing demand for expedited freight services, strategic acquisitions, and investments in digitalization. Additionally, the company's focus on dedicated truckload and managed transportation services, as well as its ability to adapt to changing market conditions, have contributed to its growth momentum.

Dedicated

Expected Growth: 6.8%

Covenant Logistics Group, Inc.'s 6.8% growth is driven by increasing demand for dedicated logistics services, strategic acquisitions, and expansion into new markets. Additionally, investments in technology and operational efficiency improvements have enhanced the company's ability to manage complex supply chains, leading to increased customer satisfaction and retention.

Managed Freight

Expected Growth: 7.2%

Covenant Logistics Group's Managed Freight segment growth of 7.2% is driven by increasing demand for logistics services, strategic partnerships, and expansion into new markets. Additionally, investments in digitalization and process optimization have improved operational efficiency, leading to higher revenue and profitability.

Warehousing

Expected Growth: 6.2%

Covenant Logistics Group's 6.2% warehousing growth driven by increasing e-commerce demand, rising need for efficient logistics, and strategic acquisitions. Additionally, investments in technology and process improvements have enhanced operational efficiency, further fueling growth.

7. Detailed Products

Dedicated Services

Customized transportation solutions for high-volume shippers, providing dedicated equipment and drivers

Truckload Services

Long-haul truckload transportation services for dry goods, refrigerated, and oversized cargo

Less Than Truckload (LTL) Services

Cost-effective transportation solutions for smaller shipments, with consolidated freight and optimized routes

Intermodal Services

Combining truck and rail transportation for efficient and cost-effective shipping of goods

Warehousing and Distribution

Secure and efficient warehousing and distribution services for inventory management and order fulfillment

Freight Brokerage Services

Matching shippers with qualified carriers for efficient and cost-effective transportation solutions

8. Covenant Logistics Group, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Covenant Logistics Group, Inc. is medium due to the availability of alternative logistics services and transportation modes.

Bargaining Power Of Customers

The bargaining power of customers is low due to the company's strong relationships with its clients and the lack of concentration in the customer base.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium due to the presence of multiple suppliers in the market, but the company's large scale of operations gives it some negotiating power.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the logistics industry, including the need for significant capital investment and regulatory compliance.

Intensity Of Rivalry

The intensity of rivalry is high due to the competitive nature of the logistics industry, with many players competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 38.94%
Debt Cost 3.95%
Equity Weight 61.06%
Equity Cost 11.02%
WACC 8.27%
Leverage 63.77%

11. Quality Control: Covenant Logistics Group, Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Covenant Logistics Group

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

21.72$

Current Price

21.72$

Potential

-0.00%

Expected Cash-Flows