Heartland Express, Inc. is a leading short-to-medium haul truckload carrier that has navigated the complexities of the transportation industry with resilience. With a focus on providing high-quality service and maintaining a modern fleet, Heartland Express has established itself as a trusted partner for major shippers across the United States and Mexico.
Business Overview A Decades-Long Journey of Steady Growth
Heartland Express was founded in 1978 by Russell A. Gerdin in North Liberty, Iowa. The company began as a small regional truckload carrier, providing transportation services within the Midwest. Over the next several decades, Heartland Express grew rapidly through strategic acquisitions and organic expansion, solidifying its position as a major player in the short-to-medium haul truckload market across the United States.
Prior to 2022, Heartland Express operated primarily as a short-to-medium haul truckload carrier, with approximately 99.9% of its operating revenue derived from shipments within the United States. The company's growth strategy has been a combination of organic expansion and strategic acquisitions. Since 1986, Heartland Express has completed ten acquisitions, including the most recent acquisitions of Smith Transport in 2022 and the non-dedicated dry van and temperature-controlled truckload business of CFI, along with CFI's Mexican logistics operations, also in 2022. These acquisitions have enabled Heartland Express to solidify its position in existing regions, expand into new operating areas, and broaden its service offerings to address the needs of its customers.
Throughout its history, Heartland Express has faced various challenges common to the trucking industry, such as economic cycles, driver shortages, and fluctuating fuel prices. The company has navigated these challenges by maintaining a focus on providing high-quality service to targeted customers, investing in late-model equipment, and implementing cost-control measures. Heartland Express has also been selective in its acquisition strategy, focusing on companies that align with its operational philosophy and can be integrated efficiently.
Today, Heartland Express operates under the brand names of Heartland Express, Millis Transfer, Smith Transport, and CFI. The company manages its business based on overall corporate operating goals and objectives that are the same for all of its brands, emphasizing customer service, safety, and asset utilization.
Financials
Heartland Express' financial performance has been marked by periods of strong growth and profitability, as well as more recent challenges due to the softening freight environment. In 2024, the company reported operating revenues of $1.05 billion, a decrease of 13.2% compared to the previous year. The company's net loss for the year was $29.7 million, or $0.38 per basic share, compared to net income of $14.8 million, or $0.19 per basic share, in 2023.
The decrease in revenue was primarily driven by a weak freight environment, leading to a decline in total miles and lower freight rates. Additionally, decreased fuel surcharge revenue resulted from fewer miles driven and a 10.8% decrease in average DOE diesel fuel prices during 2024 compared to 2023.
For the most recent quarter, Heartland Express reported revenue of $242.6 million and a net loss of $1.9 million. The company's annual operating cash flow for 2024 was $144.3 million, with a free cash flow of $34.8 million.
In terms of geographic performance, Heartland Express primarily operates in the United States, with immaterial revenue derived from Mexico and Canada. The acquisition of CFI in 2022 expanded the company's cross-border freight services, with Mexico logistics revenue now representing 3% of consolidated operating revenue.
Liquidity
Despite the recent financial headwinds, Heartland Express remains a financially sound company. As of December 31, 2024, the company had total assets of $1.3 billion and stockholders' equity of $822.6 million. The company's debt position has also improved, with net debt of $187.94 million at the end of 2024, down from $271.88 million a year earlier.
Heartland Express had $12.8 million in cash and cash equivalents, $189.7 million in outstanding debt, $11 million in finance lease liabilities, and $7.9 million in operating lease obligations as of December 31, 2024. The company's debt-to-equity ratio stands at 0.14, indicating a relatively low level of leverage. Additionally, Heartland Express had $88.3 million available in borrowing capacity on its Revolving Facility.
Operational Efficiency and Fleet Management A Key Competitive Advantage
Heartland Express' operational efficiency and fleet management strategies are core to its success. The company operates a relatively new fleet of tractors and trailers, with an average tractor age of 2.5 years and an average trailer age of 7.4 years as of December 31, 2024. This focus on maintaining a modern fleet helps to keep operating costs low, improve driver comfort, and enhance the dependability of Heartland Express' services.
The company's depreciation strategy, which utilizes the declining balance method for new tractors and the straight-line method for trailers, provides flexibility in managing its equipment portfolio. This approach allows Heartland Express to capitalize on opportunities in the new and used equipment markets, size its fleet to match the volume of attractive freight, and manage its cash tax expense.
Acquisitions and Integration Challenges
Heartland Express' recent acquisitions of Smith Transport and CFI have presented both opportunities and challenges for the company. The acquisitions have significantly expanded Heartland Express' scale and service offerings, including the addition of cross-border freight and logistics services in Mexico. However, the integration of these acquired businesses has been complicated by the weak freight environment, which has pressured the company's financial performance.
During 2024, Heartland Express experienced difficulties in controlling costs and improving profitability at CFI. The integration of Smith Transport, which was acquired shortly before CFI, has also posed challenges and disruptions as the company works to optimize the combined operations.
Addressing the Driver Shortage and Retaining Talent
Like many others in the truckload industry, Heartland Express has faced the ongoing challenge of attracting and retaining qualified drivers. The company has sought to address this issue by offering competitive compensation and benefits packages, as well as investing in driver training programs.
Heartland Express' comprehensive driver compensation and benefits program rewards drivers for years of service and safe operating mileage benchmarks. The company has also explored the expansion of its driver training school initiatives, such as the Millis Training Institute and the recently launched Heartland Training Institute, to identify and develop capable individuals into professional truck drivers.
These efforts have helped Heartland Express maintain driver turnover rates that are lower than the industry average, a critical factor in the company's ability to deliver reliable and high-quality service to its customers.
It's worth noting that driver availability began to change late in 2022 and into 2023 as a result of the declining freight and economic environments. The company continues to explore new strategies to attract and retain qualified drivers in response to changing market conditions and demands.
Adapting to Regulatory Changes and Environmental Concerns
The trucking industry is subject to a constantly evolving regulatory landscape, and Heartland Express has demonstrated its ability to adapt to these changes. The company has invested in technologies and equipment to ensure compliance with regulations, such as the Federal Motor Carrier Safety Administration's (FMCSA) Compliance, Safety, Accountability (CSA) program and the electronic logging device (ELD) mandate.
Additionally, Heartland Express has focused on reducing its environmental impact. The company has been recognized with the U.S. Environmental Protection Agency's SmartWay Excellence Award in seven of the last ten years, reflecting its commitment to sustainability and efforts to improve fuel efficiency and reduce emissions.
As the industry continues to navigate the challenges posed by climate change and evolving environmental regulations, Heartland Express' proactive approach to environmental stewardship positions the company well for the future.
Outlook and Conclusion
Heartland Express' performance in recent years has been impacted by the challenging freight environment, which has contributed to the company's net losses in 2024 and 2023. However, the company's management has expressed cautious optimism about the first quarter of 2025, noting a "positive shift in customer rate and volume negotiations" that could lead to improved momentum as the year progresses.
Despite the near-term headwinds, Heartland Express remains a well-positioned truckload carrier with a strong balance sheet, a modern fleet, and a focus on operational excellence. The company's strategic acquisitions, commitment to driver retention, and adaptation to regulatory and environmental changes suggest that Heartland Express is poised to capitalize on future growth opportunities in the industry.
The company's financial goals include generating an operating ratio in the low to mid-80s, growing revenue profitably through organic and acquisition-driven growth, and maintaining a healthy balance sheet. While Heartland Express has incurred significant debt to fund its recent acquisitions, it has been making progress in paying down this debt and improving its operational and financial performance.
As the transportation sector continues to evolve, Heartland Express' resilience, innovative approach, and dedication to providing high-quality service make it a company worth watching in the years to come. The company's geographic reach and terminal locations, with approximately 80% of its terminals located within 200 miles of the 30 largest metropolitan areas in the U.S., assist with driver recruiting and retention, efficient fleet maintenance, and consistent customer engagement. This strategic positioning, combined with Heartland Express' focus on providing high-quality service to targeted customers with a high density of freight in its regional operating areas, sets the stage for potential long-term success in the competitive truckload carrier market.