Werner (WERN) Up 18.1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Werner Enterprises (WERN). Shares have added about 18.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Werner due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Werner's Q3 Earnings Lag Estimates
Werner's third-quarter 2022 earnings of 90 cents per share missed the Zacks Consensus Estimate of 97 cents. However, the bottom line rose 14% on a year-over-year basis.
Total revenues of $827.6 million outperformed the Zacks Consensus Estimate of $819.8 million. The top line increased 18% on a year-over-year basis, primarily on higher revenues in the Truckload Transportation Services (TTS) and Logistics segments.
Operating income (adjusted) came in at $79.45 million in the reported quarter, up 8% year over year. Adjusted operating margin fell 90 basis points (bps) to 9.6%. Operating expenses rose 18.9% to $751.35 million in the reported quarter.
Revenues in the TTS segment increased 18% on a year-over-year basis to $621.86 million on the back of solid freight demand. Adjusted operating income increased 17% to $76.34 million. Adjusted operating margin fell 10 bps to 12.3%. Adjusted operating ratio (operating expenses as a percentage of revenues) improved 10 bps to 87.7%.
The Logistics segment’s revenues totaled $187.13 million, up 18% year over year. The segment reported an adjusted operating income of $5.65 million, down 26% year over year. Adjusted operating margin fell 180 bps to 3%.
As of Sep 30, 2022, Werner had cash and cash equivalents of $125.68 million compared with $54.42 million at the end of June 2022. Long-term debt (net of current portion) totaled $568.75 million at the end of the reported quarter compared with $440 million at the end of June 2022.
The company generated $65.2 million of cash from operations in third-quarter 2022. Capital expenditures came in at $100.6 million.
During the reported quarter, Werner repurchased 215,204 shares for a total cost of $8.3 million. As of Sep 30, 2022, WERN had 2.3 million shares available under its share repurchase authorization.
Werner now anticipates TTS truck growth of 3-5% (prior view: 2-5%) for 2022 from the year-ago quarter’s reported figure. Net capital expenditures are estimated to be in the band of $300-$325 million (previous view: $275-$325 million).
Under the TTS guidance, WERN continues to estimate Dedicated revenue per truck per week to increase 6-8% in 2022, owing to expectations of strong rates. The effective income tax rate is still expected to be at 24.5-25.5%.
One-way Truckload revenues per total mile are now predicted to be flat to down 3% (previous outlook: up 2-5%). Werner expects the truck age to be 2.3 years (prior view: 2.2 years) for 2022 (commensurate with 2021), while the 2022 trailer age is forecasted to be five years (prior view: 4.8 years).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -8.2% due to these changes.
Currently, Werner has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Werner has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Werner is part of the Zacks Transportation - Truck industry. Over the past month, Knight-Swift Transportation Holdings (KNX), a stock from the same industry, has gained 17.9%. The company reported its results for the quarter ended September 2022 more than a month ago.
Knight-Swift reported revenues of $1.9 billion in the last reported quarter, representing a year-over-year change of +15.5%. EPS of $1.27 for the same period compares with $1.30 a year ago.
Knight-Swift is expected to post earnings of $1.16 per share for the current quarter, representing a year-over-year change of -28%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.4%.
Knight-Swift has a Zacks Rank #5 (Strong Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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