Hot Stock of the Day: Heartland Express Inc. (NASDAQ: HTLD)

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NORTH LIBERTY, Iowa, January 22, 2020 – Shares of Heartland Express Inc. (NASDAQ: HTLD) lost -0.57% to $21.01. The stock traded total volume of 191.874K shares lower than the average volume of 263.16K shares.

Heartland Express Inc. (NASDAQ: HTLD) ended the third quarter of 2019 with net income of $20.50M, compared to $19.10M in the third quarter of 2018, an increase of $1.40M (7.6%).  Basic earnings per share were $0.25 during the quarter, compared to $0.23 basic earnings per share in the third quarter of 2018. Operating revenues were $147.90M, compared to $151.30M in the third quarter of 2018, a decrease of $3.40M, (2.2%).  Operating revenues for the quarter included fuel surcharge revenues of $18.40M, compared to $21.40M in the same period of 2018, a $3.00M decrease. Operating revenues decreased 0.3%, excluding the impact of fuel surcharge revenues, but increased sequentially to the first and second quarters of 2019. Operating income for the three month period ended September 30, 2019 increased $1.60M primarily due to $5.40M more gains on disposal of property and equipment partially offset by Millis Transfer acquisition impacts as compared to the same three month period in 2018. The Company posted an operating ratio of 81.9%, non-GAAP adjusted operating ratio of 79.4%, and a 13.9% net margin (net income as a percentage of operating revenues) in the third quarter of 2019 compared to 83.4%, 80.7%, and 12.6%, respectively, in the third quarter of 2018.

For the nine month period ended September 30, 2019, the Company recorded net income of $60.20M, compared to $50.20M in the same period of 2018, a 19.8% increase. Basic earnings per share were $0.73 compared to $0.61 earnings per share in the same period of 2018.  Operating revenues were $429.60M, compared to $463.80M in the same period of 2018. Operating revenues included fuel surcharge revenues of $53.50M, compared to $65.30M in the same period of 2018, an $11.80M decrease. Operating revenues excluding fuel surcharge revenue decreased 5.6%. Operating income for the nine month period increased $16.40M mainly as a result of decreased operating costs and $8.60M more gains on disposal of property and equipment. The Company posted an operating ratio of 82.2%, non-GAAP adjusted operating ratio of 79.6%, and a 14.0% net margin (net income as a percentage of operating revenues) in the nine months ended September 30, 2019 compared to 87.0%, 84.9% and 10.8%, respectively, in the 2018 period.

Balance Sheet, Liquidity, and Capital Expenditures

At September 30, 2019, the Company had $111.90M in cash balances and no borrowings under the Company’s unsecured line of credit. As a result of the Millis Transfer acquisition, $53.50M in revenue equipment related debt remained following $39.90M of payments made between the acquisition date and September 30, 2019.  Subsequent to September 30, 2019, the Company paid down an additional $32.00M and expects to pay off the remaining $21.50M by December 31, 2019.  The Company had $88.70M in available borrowing capacity on the line of credit at September 30, 2019 after consideration of $11.30M outstanding letters of credit. In addition to the current borrowing base of $100.0M, the Company has the ability to increase the available borrowing base by an additional $100.0M, subject to normal credit and lender approvals.  The Company continues to be in compliance with associated financial covenants.  The Company ended the quarter with total assets of $949.00M and stockholders’ equity of $673.10M.

Net cash flows from operations for the nine months of 2019 were $109.40M, 25.5% of operating revenue. The primary use of net cash generated from operations during the nine month period ended September 30, 2019 was $62.10M paid at closing for the acquisition of Millis Transfer, $54.20M for net equipment transactions, $39.90M for the retirement of Millis Transfer debt acquired, and $4.90M for dividends. The average age of the Company’s tractor fleet was 1.7 years as of September 30, 2019 compared to 1.3 years at September 30, 2018.  The average age of the Company’s trailer fleet was 3.5 years at September 30, 2019 compared to 4.2 years at September 30, 2018.  The Company currently anticipates a total of approximately $35 to $45.0M in net capital expenditures for the remainder of calendar year 2019.  The Company ended the past twelve months with a return on total assets of 9.6% and a 12.8% return on equity.

During the three and nine months ended September 30, 2019, the Company purchased no shares of our common stock but purchased 1.40M shares of our common stock for $25.10M during the nine months ended September 30, 2018. Our outstanding shares at September 30, 2019 were 82.00M shares. A total of 6.10M shares of common stock have been repurchased for $113.80M over the past five years. The Company has the ability to repurchase an additional 6.90M shares under the current authorization which would result in 75.20M outstanding shares if fully executed.

HTLD has the market capitalization of $1.70B and its EPS growth ratio for the past five years was 1.30%. The return on assets ratio of the Company was 9.60% while its return on investment ratio stands at 11.50%. Price to sales ratio was 2.95 while 56.50% of the stock was owned by institutional investors.