Ahead of the Bell: Covenant Transportation Group

The Chattanooga, Tenn., company said late Monday that while it saw fewer accidents in the third-quarter than in several years, the accidents it did have were severe. It expects charges associated with these accidents to cut third-quarter profit by 11 cents to 14 cents.

The company also said it signed a new $85 million revolving credit facility and said it feels comfortable with its current liquidity. But the closing of another credit agreement is expected to result in a third quarter writedown of about $1 million.

Lower diesel costs, increased surcharges and improved efficiency should slightly offset these factors, Covenant said.

The company said it was unable to predict its earnings for the third quarter. It expects charges to cut into its profit by about 30 cents per share, compared with about 20 cents per share in positive one-time items.

Covenant is set to report third-quarter results on Oct. 27.

In a note to clients, Morgan Keegan analyst Chaz Jones lowered his third-quarter forecast to 8 cents per share from 27 cents per share, citing uncertain freight volume trends.

But he raised his 2008 and 2009 earnings prediction, noting he is "encouraged by some underlying trends at the company."

Jones suggested that if the company can make progress on its efficiency initiatives, "we believe profitability is achievable in the coming quarters."