The U.S. economy seems to be cycling down, while fuel prices remain at record levels. That's not a good combination for trucking concern Covenant Transport (NASDAQ:CVTI). The provider of long-haul and regional freight-transport services faces a rough road in the short term, but has several strengths to help it ride out the bumps.

The Chattanooga, Tenn.-based company announced on Thursday that it anticipates second-quarter earnings per share to fall between $0.02 and $0.08. Those new figures represent a major slide from the $0.30 per share Covenant delivered in the same period last year, and they're well below the $0.20 consensus estimate among analysts. In a sign that things aren't likely to be looking up soon, the firm also withdrew guidance for the full year.

Covenant blamed the warning primarily on weak freight demand, but it also cited fuel prices' role in eroding earnings. The company had been expecting some slowdown, but apparently not this much. Utilization is now expected to be off by 8% to 9%, compared with initial projections of a 2% decline. Fuel cost, meanwhile, will amount to an additional $0.06-per-share drag on earnings vs. the second quarter of 2004.

Weak demand and high fuel prices, the source of Covenant's woes, could actually be part of the same trend. Trucking concerns like Covenant compete with more fuel-efficient railroads. With the economy slowing, shipping capacity is not so tight, and as a result, more companies may be choosing to move their wares via rail. Results from several railroad companies, including Genesee & Wyoming (NYSE:GWR) and Railamerica (NYSE:RRA), have been positive.

This state of affairs doesn't bode well for Covenant. However, the company has invested heavily in its trucks and now boasts one of the newest fleets in the industry. That should help it save on maintenance costs. In addition, Covenant has drastically reduced its long-term debt. As of March 31, long-term debt amounted to $10,000, compared with $8 million at the end of 2004.

For now, investors should not expect a lot from Covenant's stock -- but at least the company has taken steps to minimize the pain.

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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.