Werner Enterprises on Wednesday reported first-quarter revenue of $832.7 million, a 9% year over year (y/y) increase compared to the same quarter in 2022.

The Omaha, Nebraska-based carrier had first-quarter adjusted earnings per share of 60 cents, about 11 cents lower than the consensus estimate and a 37% y/y decrease compared to the same year-ago quarter.

Werner (NASDAQ: WERN) beat Wall Street consensus quarterly revenue estimates of about $830 million.

“Freight in January was soft, but better than expected,” Derek Leathers, chairman, president and CEO, said during a call with analysts after the market closed on Wednesday. “As February progressed, freight began to moderate and in March it took a step down, in contrast to the strengthening we typically see during the month.”

Leathers said one-way truckload and logistics were a challenge during the first-quarter “with overall market conditions of less freight available at increased price competition.”

“In addition, we faced broader industry issues, including higher insurance and claims and higher supplies, maintenance, higher driver and non-driver pay and a moderating freight and rate market, also pressured first-quarter earnings,” Leathers said.

One-way truckload, dedicated and logistics revenues increase during Q1

Werner’s dedicated truckload segment revenue during the first-quarter increased 8.6% y/y to $310.1 million, held aloft by steady demand, Leathers said.

“Dedicated freight demand in the first quarter was solid and steady in line with our expectations,” Leathers said. 

By the end of the first-quarter, Werner had 5,370 trucks in its dedicated fleet, with revenue averaging $5,345 a week per truck.

Werner’s one-way truckload segment was affected by weaker freight demand and competitive pricing, with first-quarter revenue decreasing 2% to $183.1 million. 

The one-way truckload segment had a fleet of 3,191 trucks, with first-quarter revenue averaging $4,414 a week per truck. 

“Despite spot freight rates declining nearly 40% year over year, the diversification and minimal spot exposure of our one-way truckload fleet enabled us to limit the decline in revenue per mile to 3%, which is at the upper end of our guidance range,” Leathers said.

The company’s logistics segment had first-quarter revenue of $229 million, a 21% y/y increase.

In November, Werner acquired freight broker ReedTMS Logistics for $112.4 million. The transaction also included the acquisition of a small dedicated carrier.

“With the acquisition of ReedTMS Logistics last November, our asset light logistics freight revenue grew in the first-quarter by $40 million to $229 million, and has a combined pro forma annual revenue run rate of nearly $1 billion,” Leathers said.

Werner had 8,170 total trucks and 27,440 trailers at the end of the first quarter. More than three-quarters of Werner’s revenue base comes from customers in the retail and food and beverage sectors. 

2023 outlook

Werner officials expect freight demand to be steady in its dedicated truckload segment through the year, with spot market rates bottoming out in the second-quarter.

“We expect spot freight rates will bottom in the second quarter and then begin to improve in the second half,” Leathers said. “Smaller carriers that rely on the spot market are facing tremendous financial challenges, given the shortfall between revenues and costs, and tighter bank lending standards with much higher interest rates, trucking company failures are increasing.”

The company expects weaker demand in its one-way and logistics segments in the second- and third-quarter, but improving in the fourth-quarter.

“We know that our customers are getting further through their inventory to stocking and starting to think and prepare differently, we  also know as it warms into the summer, with 15% of our business in food and beverage, that has positive impacts on freight flows and that part of our market as well,” Leather said. “We are encouraged by some of what we’ve seen in the last couple of weeks of April, but I certainly don’t want to be too optimistic at this point. I’d rather cautiously continue to observe it and see if we can continue to see this trend develop.”

Werner EnterprisesQ1/23Q1/22Y/Y % ChangeConsolidated TL:Revenue$588.3M$558.4M5.4%Adjusted OR % (ex fuel)89.3%83.6%7%One-way TL:Revenue (ex fuel)$183.1M$186.8M(2%)Average trucks3,1913,0644%Miles/truck/week (Y/Y % change)(2.8%)(8.1%)N/ADeadhead %14.1%11.8%19.4%Revenue/total mile (Y/Y % change)(3.2%)20.8%N/ARevenue/truck/week (ex fuel)$4,414$4,690(6%)Dedicated TL:Revenue (ex fuel)$310.1M$285.6M8.6%Average trucks5,3705,1743.8%Revenue/truck/week (ex fuel)$5,345$4,24725.8%Logistics:Revenue$228.7$189M21%Adjusted operating income$6.4M$9.2M(30%)Adjusted operating margin 2.8%4.9%(42%)Consolidated:Revenue$842.7M$764.6M9%Adjusted operating margin %6.9%11.3%(39%)Adjusted EPS$0.60$0.96(37%)Werner Enterprises key performance indicators. Revenue in millions.

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