It has been about a month since the last earnings report for Schneider National (SNDR). Shares have added about 1.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is 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 drivers.
Earnings Miss at Schneider National in Q2
Schneider National's second-quarter 2019 adjusted earnings of 34 cents per share missed the Zacks Consensus Estimate by a penny. The bottom line also decreased 15% year over year. Also, operating revenues dipped 2% to $1.21 billion, lagging the Zacks Consensus Estimate of $1.3 billion. Moreover, revenues (excluding fuel surcharge) slid 1% to $1.09 billion. Results were hampered by lower volumes and other factors.
Meanwhile, income from operations (on a reported basis) plunged 46% to $49.2 million in the second quarter. Also, adjusted operating ratio (operating expenses as a percentage of revenues) deteriorated 110 basis points to 92.3%.
Truckload revenues (excluding fuel surcharge) declined 6% to $534.9 million. Revenue per truck per week for the segment dropped 7%. This downside was due to decreased productivity as a result of lower volumes among other factors. Dedicated standard revenue per truck per week fell 7.4% on a year-over-year basis.
Income from operations at the segment tumbled 87% due to lower for-hire volumes, FTFM (First to Final Mile) goodwill impairment charge and other factors. Moreover, operating ratio deteriorated to 98.5% compared with 89.2% in the year-ago period.
Intermodal revenues (excluding fuel surcharge) rose 12% to $259.8 million on 2% growth in orders and an 11% rise in revenue per order. The improvement in revenue per order was primarily owing to increased contract pricing and the length of haul.
Segmental income from operations decreased 6% as a result of increased purchased transportation costs and reduced asset utilization. Additionally, intermodal operating ratio deteriorated to 88.2% in the reported quarter from 86% in the year-ago period.
Logistics revenues (excluding fuel surcharge) dropped 9% to $227 million due to lower revenue per order among other factors. Brokerage accounted for 87.5% of logistics revenues (excluding fuel surcharge) in the quarter compared with 78.9% in the prior year.
Lower customer volumes at the company’s supply chain and import/export businesses and certain other factors resulted in 12% decline in segmental income from operations. Further, operating ratio at the segment deteriorated to 96% from 95.9% in the second quarter of 2018.
2019 EPS View Trimmed
The company expects full-year adjusted earnings per share between $1.30 and $1.38, lower than the previous projection of $1.50-$1.60 (which was slashed from $1.65-$1.75 anticipated earlier). The bearish view is due to expectation of weak pricing and lower demand for the company’s for-hire Truckload, Intermodal and brokerage services in the second half of the year. Meanwhile, the forecast for net capital expenditures has been reduced to $325 million from $340 million expected previously.
First to Final Mile Service to Shut Down
The earnings release apart, Schneider announced the shutdown of its First to Final Mile (FTFM) service within the truckload unit due to its below-par performance. The operations will close completely by this year-end and the company will bear total pre-tax restructuring charges of $50-$70 million during the second half.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -11.17% due to these changes.
Currently, Schneider National has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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 A. 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 this revision indicates a downward shift. It's no surprise Schneider National has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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