Bear of the Day: Schneider National (SNDR)
Schneider National, Inc. SNDR is just trying to make it through this down cycle in the freight industry. This Zacks Rank #5 (Strong Sell) is expected to see earnings fall 46.2% this year.
Schneider National provides surface transportation and logistics solutions in North America. It has been in business for 88 years. Schneider provides truckload, intermodal, and logistics services throughout the US, Canada and Mexico.
A Big Miss in the Third Quarter
On Nov 2, 2023, Schneider reported its third quarter 2023 earnings and missed big on the Zacks Consensus. Earnings were just $0.20 versus the Zacks Consensus of $0.38. That's a 47.4% miss.
The company didn't mince words about the quarter.
"Our enterprise experienced year over year declines in revenue and earnings in the third quarter, a period which we believe represents the most challenging phase of this prolonged freight recession," said Mark Rourke, President and Chief Executive Officer of Schneider.
"Our results were driven by ongoing price pressures primarily in our network businesses, as well as other headwinds such as fuel, bad debt, and lower equipment gains," he added.
Operating revenues fell 19% to $1.352 billion from $1.675 billion a year ago.
Truckload revenues (excluding fuel surcharge) fell 6% to $535.3 million year-over-year driven by unfavorable pricing in network, partially offset by the impact of organic dedicated growth and M&M Transport revenues.
Intermodal took a big hit, as revenues (excluding fuel surcharge) fell 21% to $263 million year-over-year drive by lower revenue per order and volume.
Logistics also struggled, with revenues (excluding fuel surcharge) falling 30%, or $138.2 million, to $326 million compared to third quarter of 2022. It was driven by decreased revenue per order, which Schneider says continues to be unfavorably impacted by lower market prices, and lower brokerage volumes which decreased 11% year over year.
Schneider Cuts Full Year Earnings Guidance
Given the difficult market conditions, it's not a surprise that Schneider cut its full year earnings guidance to a range of $1.40-$1.45 from its prior guidance of $1.75 to $1.90.
As a result, the analysts cut their earnings estimates for both this year and next.
7 estimates were lowered in the last 60 days pushing the 2023 Zacks Consensus down to $1.42 from $1.81. That's now within the new guidance range but it means earnings are expected to decline 46.2% as the company made $2.64 last year.
The analysts were equally as bearish on 2024. 7 estimates were also cut for next year which pushed the Zacks Consensus down to $1.77 from $2.24. But that's an earnings increase of 25% given the cuts to 2023.
Are Shares Cheap?
Given the bearishness, it's not surprising that the shares have sold off in the last 3 months and are down 12.7% during that time. Year-to-date they are up 2.7%, however.
Image Source: Zacks Investment Research
Are they cheap? Schneider trades with a forward P/E of 16.9. It also has a price-to-sales (P/S) ratio of just 0.8. A P/S ratio under 1.0 usually indicates a company is undervalued.
Schneider also has a price-to-book (P/B) ratio of 1.4. A P/B ratio under 3.0 can indicate that there is value.
The company is also shareholder friendly. It pays a dividend, currently yielding 1.5%. It also started a $150 million stock repurchase program in Feb 2023. As of Sep 30, 2023, it had repurchased $50.6 million year-to-date.
Investors interested in trucking and logistics, may want to wait on the sidelines for indications that the recovery in trucking is on its way before diving in.
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