Why Is Werner (WERN) Up 11.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Werner Enterprises (WERN). Shares have added about 11.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Werner's Q3 Earnings Lag Estimates
Quarterly earnings per share of 42 cents lagged the Zacks Consensus Estimate of 48 cents and declined 53% on a year-over-year basis.
Total revenues of $817.74 million outperformed the Zacks Consensus Estimate of $802.4 million. The top line dipped 1% on a year-over-year basis due to a $49.7 million decrease in Truckload Transportation Services (TTS) revenues, partially offset by Logistics revenue growth of $43.1 million.
Operating income (adjusted) of $41.85 million fell 47% year over year. Adjusted operating margin contracted 450 basis points (bps) to 5.1%. Total operating expenses rose 3.7% to $779.84 million in the reported quarter.
Segmental Results
Revenues in the TTS segment tumbled 8% on a year-over-year basis to $572.19 million due to lower fuel surcharge revenues. Adjusted operating income decreased 45% to $41.64 million. Adjusted operating margin collapsed 500 bps to 7.3%. Adjusted operating ratio (operating expenses as a percentage of revenues) improved 500 bps to 92.7%.
Logistics’ revenues totaled $230.25 million, up 23% year over year. Adjusted operating income of $3.16 million declined 44% year over year. Adjusted operating margin fell 160 bps to 1.4%.
Liquidity
As of Sep 30, Werner had cash and cash equivalents of $42.75 million compared with $46.5 million at the prior-quarter end. Long-term debt (net of current portion) totaled $686.25 million at the end of the reported quarter compared with $636.25 million at the prior-quarter end.
The company generated $74.2 million of cash from operations in third-quarter 2023. Net capital expenditure amounted to $120 million.
In the quarter under review, Werner did not repurchase any shares. As of Sep 30, WERN had 2.3 million shares available under its share repurchase authorization.
Outlook
For 2023, Werner anticipates TTS truck growth to be between (5%) and (3%) (prior view: down 4-2%).
Net capital expenditure is estimated to be in the range of $425-$450 million (prior view: $400-$450 million). Under the TTS guidance, WERN projects dedicated revenues per truck per week growth to rise from breakeven to 3% in 2023.
One-way Truckload revenues per total mile are predicted to decline 9-7% (prior view: 4-7% down). Werner expects the average truck age to be 2.1 years for 2023, while the trailer age is forecasted to be five years. Tax rate for 2023 is anticipated to be in the range of 24-25%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -25.92% due to these changes.
VGM Scores
Currently, Werner has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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 #5 (Strong 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 9.6%. The company reported its results for the quarter ended September 2023 more than a month ago.
Knight-Swift reported revenues of $2.02 billion in the last reported quarter, representing a year-over-year change of +6.5%. EPS of $0.41 for the same period compares with $1.27 a year ago.
Knight-Swift is expected to post earnings of $0.48 per share for the current quarter, representing a year-over-year change of -52%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.9%.
Knight-Swift has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Werner Enterprises, Inc. (WERN) : Free Stock Analysis Report
Knight-Swift Transportation Holdings Inc. (KNX) : Free Stock Analysis Report
