Here's Why Investors Should Avoid Werner (WERN) Stock Now
Werner Enterprises WERN is currently mired in multiple headwinds, which we believe, have made it an unimpressive investment option.
Let’s delve deeper.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for current-quarter earnings has been revised 26.4% downward over the past 60 days. For the current year, the consensus mark for earnings has moved 13.8% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Weak Zacks Rank and Style Score: Werner currently carries a Zacks Rank #5 (Strong Sell). Moreover, the company’s current Value Style Score of C shows its unattractiveness.
Unimpressive Price Performance: WERN has declined 11.6% over the past six months compared with its industry’s 16.7% growth.
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Other Headwinds: Werner Enterprises is suffering from weak freight demand. Due to this, WERN reported lower-than-expected earnings per share in each of the first two quarters of 2023. As a result, management lowered its 2023 guidance for growth in the Truckload Transportation Services or TTS segment. It anticipates TTS truck growth to be between (2%) and 4% (prior view: (2) to 1%).
Moreover, high operating expenses primarily due to increased salaries, wages and benefits, escalated fuel, and rent and purchased transportation costs keep WERN’s bottom line under pressure. Werner’s weak liquidity position is also concerning.
Bearish Industry Rank: The industry, to which WERN belongs, currently has a Zacks Industry Rank of 244 (of 250 plus groups). Such an unfavorable rank places WERN in the bottom 3% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Stocks to Consider
Investors interested in the Zacks Transportation sector may consider stocks like United Airlines UAL and Air Transport Services ATSG. UAL and ATSG currently sport a Zacks Rank #1 (Strong Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
United Airlines is seeing a steady recovery in domestic and international air travel demand. Owing to this, UAL expects revenues for the September quarter to grow 10-13% year over year. Our projection for third-quarter total revenues hints at an increase of 11.4% year over year.
For third-quarter 2023, United Airlines anticipates capacity to improve 16% from the year-ago reported figure. The Zacks Consensus Estimate for UAL’s current-year earnings has been revised 14.5% upward over the past 60 days.
The uptrend with respect to e-commerce even in the post-pandemic scenario is a huge positive for Air Transport Services. It is the primary driver behind the uptick in demand for midsize air freighters.
Driven by the upbeat demand, ATSG has delivered a record six converted freighters under lease in a month to its customers worldwide. The Zacks Consensus Estimate for ATSG’s current-year earnings has been revised 11.9% upward over the past 60 days.
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Werner Enterprises, Inc. (WERN) : Free Stock Analysis Report
