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Werner Enterprises (WERN) Q2 Earnings Miss, Increase Y/Y

Zacks Equity Research

Werner Enterprises, Inc. WERN delivered second-quarter 2019 adjusted earnings per share (excluding a penny from non-recurring items) of 63 cents, missing the Zacks Consensus Estimate by a penny. Results were affected by softness in freight demand and weak pricing. However, the bottom line inched up 3.3% year over year.

Although total revenues of $627.5 million fell short of the Zacks Consensus Estimate of $637.5 million, it inched up 1.4% from the year-ago figure. The top line benefited from dedicated fleet expansion, lane mix changes and higher contractual rates.

Operating income (adjusted) came in at $59.2 million in the reported quarter, up 1%. Meanwhile, adjusted operating margin dipped 10 basis points (bps) to 9.4%. Also, operating expenses increased slightly to $569.09 million.

During the quarter, Werner Enterprises repurchased 700,000 shares for $21.8 million. As of Jun 30, 2019, the company had 4.3 million shares for repurchase under its current buyback program.

Werner Enterprises, Inc. Price, Consensus and EPS Surprise

 

Werner Enterprises, Inc. Price, Consensus and EPS Surprise

Werner Enterprises, Inc. price-consensus-eps-surprise-chart | Werner Enterprises, Inc. Quote


Segmental Results

Truckload Transportation Services (TTS) segment’s revenues totaled $479.96 million, up 2% year over year. This upside was owing to the 5.2% rise in average trucks in service. However, adjusted operating income slid 4% to $52.4 million in the quarter. Additionally, adjusted operating margin was down 70 bps to 10.9%. Also, adjusted operating ratio deteriorated 70 bps to 89.1%.

Werner Logistics segment’s revenues grossed $130.9 million, down 2% year over year. Segmental results were hampered by lower volumes and spot rates among other factors. Operating income too decreased 7% to $5.2 million in the quarter under discussion. Additionally, operating margin contracted 20 bps to 4% due to 2% rise in other operating expenses compared to no change in gross profit. The “other” segment accounted for the remainder of the top line.

Liquidity

As of Jun 30, 2019, the company had cash and cash equivalents of $46.42 million compared with $33.93 million at 2018 end. Long-term debt (net of current portion) totaled $390 million at the end of the second quarter compared with $50 million in 2018 end.

2019 Outlook

The Zacks Rank #3 (Hold) company continues to anticipate 3-5% truck growth in the current year with the same expected primarily in its Dedicated fleet. Moreover, this uptick is expected in the first three quarters of the year. Meanwhile, one-way truckload revenue per total mile is estimated to either decline up to 3% or remain flat year over year. However, the company continues to expect gains on the sales of equipment between $18 million and $20 million. Effective tax rate is reiterated in the 25-26% band while net capital expenditures are maintained between $275 million and $300 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting second-quarter earnings reports from key players, such as Expeditors International of Washington, Inc. EXPD, Air Lease Corporation AL and Hertz Global Holdings, Inc HTZ. While Expeditors and Hertz will report earnings figures on Aug 6, Air Lease will announce the same on Aug 8.

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