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Solid Cash Balance Boosts Schneider (SNDR) Despite High Capex

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Schneider National, Inc. (SNDR - Free Report) currently benefits from solid segmental performances and a strong balance sheet. High capex may dent SNDR’s free cash flow-generating ability.

Schneider National's first-quarter earnings (excluding 6 cents from non-recurring items) of 57 cents per share beat the Zacks Consensus Estimate of 52 cents. The bottom line surged 83.9% from the year-ago quarter’s levels. Operating revenues of $1,620.5 million surpassed the Zacks Consensus Estimate of $1,555.4 million and rallied 31.9% year over year as economic activities gained pace.  

How is Schneider National Faring?

SNDR has a sound liquidity position. Its cash and equivalents at the end of the first quarter totaled $321 million, higher than the current maturities of debt and finance lease obligations of $2 million. This indicates that Schneider National has enough cash to pay off its short-term debt.

Solid performance in the Truckload, Intermodal and Logistics segments is driving Schneider National’s top line, which increased 21%, 18% and 53%, respectively, year over year in first-quarter 2022. Surge in Truckload revenues was primarily owing to new business growth, inclusion of Midwest Logistics Systems (MLS), favorable revenues and network management. The Intermodal segment is benefiting from an improvement in revenues per order, while the Logistics unit is thriving on the back of increased revenues per order and brokerage volume growth.  

The full-year guidance for net capital expenditures was raised by Schneider National to $500 million from $450 million, while releasing first-quarter results. Rising capital expenditure might hurt bottom-line growth. High capex may also dent SNDR’s free cash flow-generating ability.

Escalating operating expenses, mainly due to high purchased transportation costs and salaries, wages and benefit expenses, can hurt the bottom line. Total operating expenses increased 29% year over year in first-quarter 2022, with a 32.5% surge in purchased transportation costs and a 26.4% rise in salaries, wages and benefit expenses.

Zacks Rank & Key Picks

Schneider National currently carries a Zacks Rank #3 (Hold). You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Zacks Transportation sector are Norfolk Southern Corporation (NSC - Free Report) , C.H. Robinson Worldwide, Inc. (CHRW - Free Report) and GATX Corporation (GATX - Free Report) .

Norfolk Southern has a trailing four-quarter surprise of 5.2%, on average, with its earnings having surpassed the Zacks Consensus Estimate in all the last four quarters.  

We are impressed with Norfolk Southern's efforts to reward its shareholders through dividends and buybacks. In January 2022, NSC's board announced a 14% increase in its quarterly dividend payout to $1.24 per share. NSC currently carries a Zacks Rank #2 (Buy).

The expected long-term (three-to-five years) earnings per share (EPS) growth rate for C.H. Robinson is pegged at 9%. Better freight market conditions are aiding CHRW.

In first-quarter 2022, the top line improved 41.8% owing to favorable truckload pricing for customers and handsome profits in ocean freight. CHRW currently carries a Zacks Rank of 2.

GATX has a trailing-four quarter surprise of 40.1%, on average, with its earnings having surpassed the Zacks Consensus Estimate in all the last four quarters.

The gradual improvement in the North American railcar leasing market is a boon for GATX. GATX currently has a Zacks Rank of 2.