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Werner Gains on Cost-Cutting Measures Amid High Debts
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We recently issued an updated report on Werner Enterprises, Inc. (WERN - Free Report) . Factors like innovative cost-cut initiatives are impressive. Meanwhile, headwinds like escalated debt levels, softness in freight demand and coronavirus-led concerns are major challenges for Werner.
Werner’s cost-cutting measures to combat the sluggish freight scenario are noteworthy. We are also impressed by the company's ability to generate free cash flow. The company generated free cash flow worth $143 million in 2019, up more than 100% year over year. The metric is expected to exceed $100 million in 2020 as well.
The company focuses on investing in new trucks and trailers to improve its operational efficiency and reduce fuel costs. It aims at maintaining a relatively young fleet of trucks and trailers. As of Dec 31, 2019, the average age of its truck fleet was 1.9 years compared with 1.8 years at 2018 end. The average age for its trailer fleet was 4 years in 2019 flat year over year.
However, as the company invests heavily in new trucks and trailers, capital expenditures are always on the rise. Although these expenses are focused on the company’s long-term growth prospects, it is important to note that such high expenses have the potential to hurt bottom-line growth.
Slowdown in freight scenario is quite worrisome and is hurting revenues and margins, significantly. Evidently, revenues in the Truckload Transportation Services (TTS) segment, the major revenue-generating division, declined 2% in fourth-quarter 2019. The downside was due to 1.8% drop in average revenues per truck and lower fuel surcharge revenues. Moreover, the coronavirus pandemic is likely to hurt revenues in first-quarter 2020.
Werner's escalating debt levels are worrisome too. The company’s long-term debt (net of current portion) at the end of 2019 was $250 million compared with $50 million in 2018 end. Also, its debt-to-equity (expressed as a percentage) of 20.3, is above the industry average. A high debt-to-equity ratio implies that the company is funding most of its ventures with debt.
Long-term (three to five years) expected earnings per share growth rate for GATX, Spirit and Höegh LNG is pegged at 15%, 12.5% and 8.5%, respectively.
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Werner Gains on Cost-Cutting Measures Amid High Debts
We recently issued an updated report on Werner Enterprises, Inc. (WERN - Free Report) . Factors like innovative cost-cut initiatives are impressive. Meanwhile, headwinds like escalated debt levels, softness in freight demand and coronavirus-led concerns are major challenges for Werner.
Werner’s cost-cutting measures to combat the sluggish freight scenario are noteworthy. We are also impressed by the company's ability to generate free cash flow. The company generated free cash flow worth $143 million in 2019, up more than 100% year over year. The metric is expected to exceed $100 million in 2020 as well.
Werner Enterprises, Inc. Price.
Werner Enterprises, Inc. price | Werner Enterprises, Inc. Quote
The company focuses on investing in new trucks and trailers to improve its operational efficiency and reduce fuel costs. It aims at maintaining a relatively young fleet of trucks and trailers. As of Dec 31, 2019, the average age of its truck fleet was 1.9 years compared with 1.8 years at 2018 end. The average age for its trailer fleet was 4 years in 2019 flat year over year.
However, as the company invests heavily in new trucks and trailers, capital expenditures are always on the rise. Although these expenses are focused on the company’s long-term growth prospects, it is important to note that such high expenses have the potential to hurt bottom-line growth.
Slowdown in freight scenario is quite worrisome and is hurting revenues and margins, significantly. Evidently, revenues in the Truckload Transportation Services (TTS) segment, the major revenue-generating division, declined 2% in fourth-quarter 2019. The downside was due to 1.8% drop in average revenues per truck and lower fuel surcharge revenues. Moreover, the coronavirus pandemic is likely to hurt revenues in first-quarter 2020.
Werner's escalating debt levels are worrisome too. The company’s long-term debt (net of current portion) at the end of 2019 was $250 million compared with $50 million in 2018 end. Also, its debt-to-equity (expressed as a percentage) of 20.3, is above the industry average. A high debt-to-equity ratio implies that the company is funding most of its ventures with debt.
Zacks Rank and Stocks to consider
Currently, Werner carry a Zacks Rank #3 (Hold).
Investors interested in the Zacks Transportation sector may also consider GATX Corporation (GATX - Free Report) , Spirit Airlines, Inc. (SAVE - Free Report) and Höegh LNG Partners LP . GATX sports a Zacks Rank #1 (Strong Buy), whereas Spirit and Höegh LNG carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term (three to five years) expected earnings per share growth rate for GATX, Spirit and Höegh LNG is pegged at 15%, 12.5% and 8.5%, respectively.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>