COMMENT: Oil price volatility raises questions about hedging strategies

In pre-announcing its Q4 2014 results, Covenant Transport confirmed the strength of the US freight market. Yield (measured by revenue per loaded mile) was up by 10% through the quarter and the company guided to earnings of US$0.70-US$0.78 per share, some 50% ahead of expectation. By any standard, these are seriously impressive numbers.

Covenant isn't necessarily the best benchmark for the US truckload fleets, however. A significant portion of its business is based on expedited team driving, which has been benefitting from strong demand perhaps as a function of the well-documented issues with West Coast ports. That aside, Covenant expects to realise pricing gains in excess of 5%-8%.