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Werner (WERN) Q4 Earnings Beat, Down Y/Y on Freight Softness

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Werner Enterprises, Inc. (WERN - Free Report) reported fourth-quarter 2019 adjusted earnings per share (excluding 3 cents from non-recurring items) of 67 cents, surpassing the Zacks Consensus Estimate of 60 cents. However, the bottom line declined 10.7% year over year due to softness in freight volumes and weak pricing.

Meanwhile, total revenues of $621.8 million lagged the Zacks Consensus Estimate of $633.8 million. The top line also dipped 3.8% year over year, primarily due to lower fuel surcharge and logistics revenues.

Operating income (adjusted) came in at $63.41 million in the reported quarter, down 14%. Moreover, adjusted operating margin dipped 120 basis points (bps) to 10.2%. Operating expenses decreased 2.7% to $556.13 million.

Werner Enterprises, Inc. Price, Consensus and EPS Surprise

 

Werner Enterprises, Inc. Price, Consensus and EPS Surprise

Werner Enterprises, Inc. price-consensus-eps-surprise-chart | Werner Enterprises, Inc. Quote

 
Segmental Results

Truckload Transportation Services (TTS) segment’s revenues of $486.57 million slipped 1.6% year over year. This downside was due to 1.8% decrease in average revenues per truck and lower fuel surcharge revenues. Adjusted operating income declined 11% to $60.37 million in the quarter. Additionally, adjusted operating margin contracted 130 bps to 12.4%. Adjusted operating ratio also deteriorated 130 bps to 87.6%.

Werner Logistics segment’s revenues grossed $120.15 million, down 12% year over year. Segmental results were hampered by reduced transactional freight opportunities, weak pricing and intense competition from logistics rivals. Operating income too plunged 54% to $3.37 million in the quarter under discussion. Further, operating margin fell 250 bps to 2.8%. The “other” segment accounted for the remainder of the top line.

Liquidity

As of Dec 31, 2019, the company had cash and cash equivalents of $26.42 million compared with $33.93 million at 2018 end. Long-term debt (net of current portion) totaled $225 million at the end of the fourth quarter compared with $50 million at 2018 end.

2020 Outlook

The Zacks Rank #3 (Hold) company anticipates truck growth to either decline up to 3% or increase up to 1%. Notably, truck count is expected to be slightly lower or flat in the first half of 2020. Gains on sales of equipment are expected to remain moderate due to weak used equipment market and lower trailer sales. The same is predicted in the range of $6-$12 million for the current year. Additionally, net capital expenditures are estimated between $260 million and $300 million. During the first half of 2020, one-way truckload revenues per total mile are forecast to decrease 5-7% from the level during the first half of 2019. Effective tax rate is projected in the 25-26% band. The company hopes to maintain the average age of its truck and trailer fleet either in the range of 1.9-4 years or near this level. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Investors interested in the broader Transportation sector are awaiting fourth-quarter earnings reports from key players like Expeditors International of Washington, Inc (EXPD - Free Report) , Air Lease Corporation (AL - Free Report) and Hertz Global Holdings, Inc (HTZ - Free Report) . While Air Lease will release fourth-quarter results on Feb 14, Expeditors and Hertz will announce the same on Feb 18 and Feb 24, respectively.

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