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Schneider National (SNDR) Up 10.3% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Schneider National (SNDR). Shares have added about 10.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Schneider National due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Earnings Beat at Schneider National in Q2

Schneider National second-quarter 2020 earnings of 26 cents per share surpassed the Zacks Consensus Estimate by 7 cents. However, the bottom line declined 23.5% on a year-over-year basis. Operating revenues dropped 15% to $1,032.8 million and lagged the Zacks Consensus Estimate of $1,040 million. Moreover, revenues (excluding fuel surcharge) fell 11% to $964.1 million. Results were hampered by lower volumes and price, downside in fuel surcharge revenues and coronavirus-led disruptions.

Income from operations (on a reported basis) increased 29% from the prior-year quarter’s level to $63.4 million. Adjusted income from operations dropped 24% to $63.6 million in the June-end quarter. Also, adjusted operating ratio (operating expenses as a percentage of revenues) deteriorated 110 basis points to 93.4%. Notably, lower the value of the ratio, the better.

Segmental Highlights

Truckload revenues (excluding fuel surcharge) slipped 16% to $451.1 million. Average trucks (company trucks and owner-operated trucks) in the segment also fell 11.7% to 10,241. Further, revenue per truck per week in the segment dropped 4.3%. This downside was mainly due to shutdown of FTFM operations, lower volumes and unfavorable pricing. Truckload income from operations was $40.5 million in the reported quarter, an increase of more than 100%. Moreover, adjusted operating ratio improved to 91% from 98.5% in the year-ago quarter.

Intermodal revenues (excluding fuel surcharge) were $219 million, a decrease of 16% from second quarter 2019. Revenue per order declining 6.3%, primarily due to weak Asia import volumes combined with the prolonged shutdown of non-essential retail customers. Segmental income from operations declined 64% to $11 million as a result increased rail purchased transportation costs. Additionally, intermodal operating ratio deteriorated to 95% in the second quarter from the prior-year quarter’s 88.2%.

Logistics revenues (excluding fuel surcharge) inched up 2% to $230.9 million, primarily due to increased volumes. Logistics income from operations dipped 11% on a year-on-year basis due to lower net revenues per order. Further, operating ratio in the segment deteriorated to 96.4% from 96% in the second quarter of 2020.

Liquidity

Schneider exited the second quarter with cash and cash equivalents of $713.8 million compared with $551.6 million at the end of 2019.

2020 EPS Guidance

Despite persisting COVID-19 led uncertainties, the company believes that the most significant impact of this unprecedented crisis on its operations was witnessed in the June quarter. Consequently, Schneider restored its full year 2020 EPS guidance. The company expects its adjusted EPS to be within the range of $1.10-$1.25. Also, the company anticipates its net capital expenditures to be approximately at $260 million.

During the second half of 2020, Schneider expects gradual improvement in its overall operating conditions from increased demand and tighter capacity along with subsequent improvement in its Intermodal margins.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 18.11% due to these changes.

VGM Scores

Currently, Schneider National has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Schneider National has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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