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Trucking Stocks Under Pressure Following Warning From Covenant

Truck transportation stocks are facing tremendous pressure after Covenant Transportation Group, Inc. CVTI 3% disclosed preliminary EPS for the third quarter that came in sharply below the estimates.

The company indicated that it sees net income between $2.1 million and $3.2 million and EPS in the range of $0.12–$0.17 for the third quarter. This is significantly lower than the Street analysts' expectations of $0.23 a share. Last year, the company earned $0.42 a share.

Covenant Transportation Chairman and CEO David Parker explained, "The main differences were higher depreciation, higher claims expense, and lower average freight revenue per tractor, partially offset by improved brokerage gross margin and a favorable effective tax rate."

The company's average freight revenue per tractor witnessed a drop of 1.2 percent on weak truckload freight market. This obviously made investors to think that other companies in the same sector could also face a similar situation.

As a result, the following stocks came under pressure and were recently seen trading down:

  • Covenant was down 13.65 percent at $15.31.

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