Freight and logistics provider Covenant Logistics (NASDAQ: CVLG) missed Wall Street’s revenue expectations in Q4 CY2025, but sales rose 6.5% year on year to $295.4 million. Its non-GAAP profit of $0.31 per share was 7% below analysts’ consensus estimates.

Is now the time to buy Covenant Logistics? Find out by accessing our full research report, it’s free.

Chairman and Chief Executive Officer, David R. Parker, commented: “Our fourth quarter resulted in a loss of $0.73 per diluted share, driven by impairment charges to goodwill and equipment and elevated insurance expense, each discussed below. Excluding these charges our non-GAAP adjusted results reflect income of $0.31 per diluted share.

Company Overview

Started with 25 trucks and 50 trailers, Covenant Logistics (NASDAQ: CVLG) is a provider of expedited long haul freight services, offering a range of logistics solutions.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Covenant Logistics’s sales grew at a mediocre 6.8% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a tough 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. Covenant Logistics’s recent performance shows its demand has slowed as its annualized revenue growth of 2.7% over the last two years was below its five-year trend.

We can dig further into the company’s revenue dynamics by analyzing its most important segment, Freight. Over the last two years, Covenant Logistics’s Freight revenue (moving cargo) was flat. This segment has lagged the company’s overall sales.

This quarter, Covenant Logistics’s revenue grew by 6.5% year on year to $295.4 million, missing Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 4.2% over the next 12 months, similar to its two-year rate. While this projection implies its newer products and services will fuel better top-line performance, it is still below the sector average.

While Wall Street chases Nvidia at all-time highs, an under-the-radar semiconductor supplier is dominating a critical AI component these giants can’t build without. Click here to access our free report one of our favorites growth stories.

Operating Margin

Covenant Logistics was profitable over the last five years but held back by its large cost base. Its average operating margin of 5.2% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, Covenant Logistics’s operating margin decreased by 6.2 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Covenant Logistics’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Covenant Logistics generated an operating margin profit margin of negative 8.2%, down 11.3 percentage points year on year. Since Covenant Logistics’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

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 is profitable.

Covenant Logistics’s EPS grew at an astounding 22.3% compounded annual growth rate over the last five years, higher than its 6.8% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

We can take a deeper look into Covenant Logistics’s earnings to better understand the drivers of its performance. A five-year view shows that Covenant Logistics has repurchased its stock, shrinking its share count by 23.5%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Covenant Logistics, its two-year annual EPS declines of 14.9% mark a reversal from its (seemingly) healthy five-year trend. We hope Covenant Logistics can return to earnings growth in the future.

In Q4, Covenant Logistics reported adjusted EPS of $0.31, down from $0.49 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Covenant Logistics’s full-year EPS of $1.52 to grow 34.9%.

Key Takeaways from Covenant Logistics’s Q4 Results

We struggled to find many positives in these results. Its Freight revenue missed and its EPS fell short of Wall Street’s estimates. The stock remained flat at $25.79 immediately after reporting.

Covenant Logistics’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).