Werner Enterprises missed second-quarter expectations Thursday and said the third quarter presents a challenge as pricing on another 25% of its contracts will be renewed, most with lower rates.

On a call with analysts, management said there was slight improvement in the middle of June and the level was held through July. It is hopeful for a seasonally normal fourth quarter, noting most customers have indicated their inventories have already been corrected.

Werner (NASDAQ: WERN) reported second-quarter adjusted earnings per share of 52 cents, which was 7 cents light of the consensus estimate and 35 cents lower year over year (y/y).

The result excluded 5 cents net in one-offs like acquisition-related expenses, costs from an insurance claim that has been appealed and a loss in an equity investment.

Lower gains on sale were a 10-cent headwind as equipment values have dropped. The carrier sold twice as many tractors and three times as many trailers in the period as it did in the year-ago quarter.

Higher interest expense was a 6-cent drag as the debt balance was higher due to past acquisitions and interest rates increased.

Management has now identified more than $40 million in cost saving opportunities, 40% of which have been realized.

Table: Werner’s key performance indicators

Total truckload revenue fell 7% y/y to $570 million. Revenue per truck per week in the dedicated fleet was up 2% excluding fuel in the quarter. The new guidance calls for the metric to be flat to up 3% y/y for the full year, implying a flattish result in the back half. (It was up 3% y/y in the first half.)

Revenue per total mile and revenue per truck were down 5% y/y in the one-way segment during the quarter. The outlook calls for a 4% to 7% y/y decline in the third quarter.

The TL segment posted a 90.3% operating ratio, which was 370 basis points worse y/y.

Werner’s logistics segment recorded revenue of $225 million, a 10% y/y increase. Loads were higher due to the ReedTMS acquisition. The segment logged a 100-bp decline in gross margin to 17.4%. The adjusted operating margin was 2.4%, 400 bps worse y/y.

Management’s guidance assumes spot rates will improve sequentially in the back half of the year and cost inflation will ease. Declining used equipment prices will continue to be a headwind to the gains it books on the sale of tractors and trailers. Full-year gains on sale are expected to range between $40 million and $50 million compared to nearly $90 million last year.

“The company did book $12 million in gains, and those are expected to moderate in 2H, so it’ll be tough to improve margins in 2H without meaningful improvement in volumes/pricing,” said Amit Mehrotra, an equities analyst at Deutsche Bank (NYSE: DB), in a Thursday note to clients.

More FreightWaves articles by Todd Maiden

Schneider National lowers 2023 guidance

Forward Air starting to see impact from Yellow’s exit

Abrupt layoffs center of lawsuit against Yellow

The post Werner misses Q2 expectations appeared first on FreightWaves.

Similar Posts

Leave a Reply