Heartland Express, Inc. (NASDAQ:HTLD)

prices have been rising for trucking and demand has increased

When I first looked at Heartland, it was a regional short to medium haul (<700 mi) trucking company with high inside ownership, no debt, regular sales growth and a sustainable strategy that avoided intermodal to kept the company out of competition with the rail industry.

Recently, the company took on some debt to acquire a very similar regional trucking company, Gordon Trucking, giving it national coverage. The stock popped 20% on the announcement.

Heartland prides itself on the newest fleet of trucks in the industry, almost all of which are 2012 or later. This meets emissions standards and helps keep fuel costs in check. It prides itself on a 98% on-time delivery record and among the highest safety record in the industry. (Recently acquired Gordon Trucking's reputation is at least as good.) It credits this to its drivers who are among the most experienced in the industry, almost all having 7 years or more driving experience. It prides itself on treating its drivers well by paying the most in the industry and ensuring lots of home time.

And Heartland's CFO is hilarious to listen to on investor calls.

All sounds great. I'm a fan. But a couple things concern me:

Although sales growth is steady, revenues and earnings are flat. Fuel costs are a persistent problem, which is partly why the fleet is so new.The biggest challenge, though, appears to be an industry-wide shortage of drivers. This is the biggest concern for me, because it could undermine their safety and efficiency record, threatening both their reputation and their margins.

As the CFO has stated repeatedly drivers are the heart of the company. That's why the company pays them well and keeps them near home. But according to Glassdoor comapny may not be living up to its promises. Before 2012, the ratings were uniformly positive, but they have fallen off substantially in the last two years. Many drivers complain that the high pay is an illusion, because the drivers aren't getting enough loads to pull (quite a concern in itself). Another frequent complaint is the unfulfilled promise of home time. Glassdoor ratings are about the same for Gordons. If these factors threaten retension and recruitment of experienced drivers, the company risks losing its competitive edge.

I'm keeping a bullish outlook, but paying close attention to these concerns.