Heartland Express (HTLD)

Freight delivery company Heartland Express (NASDAQ:HTLD) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 18.8% year on year to $219.4 million. Its GAAP loss of $0.18 per share was significantly below analysts’ consensus estimates.

Company Overview

Founded by the son of a trucker, Heartland Express (NASDAQ:HTLD) offers full-truckload deliveries across the United States and Mexico.

The 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.

Competitors offering similar products include Schneider (NYSE:SNDR), Werner (NASDAQ:WERN), and J.B. Hunt (NASDAQ:JBHT).

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Heartland Express’s 9.8% annualized revenue growth over the last five years was solid. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Heartland Express’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 6.8% over the last two years. Heartland Express isn’t alone in its struggles as the Ground Transportation industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

This quarter, Heartland Express missed Wall Street’s estimates and reported a rather uninspiring 18.8% year-on-year revenue decline, generating $219.4 million of revenue.

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.

Heartland Express’s unit economics are better than the typical industrials business, signaling its products are somewhat differentiated through quality or brand. As you can see below, it averaged a decent 31.6% gross margin over the last five years. That means for every $100 in revenue, roughly $31.62 was left to spend on selling, marketing, R&D, and general administrative overhead.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Heartland Express has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 8.3%, higher than the broader industrials sector.

Analyzing the trend in its profitability, Heartland Express’s operating margin decreased by 17 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.

This quarter, Heartland Express generated an operating profit margin of negative 6.8%, down 1.5 percentage points year on year. The reduction is quite minuscule and shareholders shouldn’t weigh the results too heavily.

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.

Sadly for Heartland Express, its EPS declined by 19.5% annually over the last five years while its revenue grew by 9.8%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

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 17 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 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 49.1% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q1, Heartland Express reported EPS at negative $0.18, up from negative $0.19 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast Heartland Express’s full-year EPS of negative $0.37 will reach break even.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Heartland Express has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 13.6% over the last five years.

Taking a step back, we can see that Heartland Express’s margin dropped by 5.7 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Heartland Express historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.8%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Heartland Express’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Heartland Express reported $23.87 million of cash and $205.8 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $155.9 million of EBITDA over the last 12 months, we view Heartland Express’s 1.2× net-debt-to-EBITDA ratio as safe. We also see its $8.53 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Its revenue missed significantly and its EBITDA fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $7.60 immediately after reporting.

Updated: July 9, 2025 at 11:24 PM EDT

Before deciding whether to buy Heartland Express or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

We see the value of companies helping their customers, but in the case of Heartland Express, we’re out. . And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets.

Heartland Express’s EV-to-EBITDA ratio based on the next 12 months is 4.7x. This valuation multiple is fair, but we don’t have much confidence in the company. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $9.50 on the company (compared to the current share price of $9.34).