Why Is Werner (WERN) Down 4% Since Last Earnings Report?
It has been about a month since the last earnings report for Werner Enterprises (WERN). Shares have lost about 4% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Werner due for a breakout? 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 Q1 Earnings & Revenues Beat Estimates
Werner Enterprises reported better-than-expected earnings and revenues for the first quarter of 2022. Both earnings and revenues also increased significantly year over year.
Werner’s first-quarter earnings (excluding 14 cents from non-recurring items) of 96 cents per share surpassed the Zacks Consensus Estimate of 86 cents. The bottom line rose 41.2% on a year-over-year basis.
Total revenues of $764.6 million also outperformed the Zacks Consensus Estimate of $744.3 million. The top line increased 24% on a year-over-year basis, primarily on higher revenues in the Truckload Transportation Services and Logistics segments.
Operating income (adjusted) came in at $86.2 million in the reported quarter, up 37% year over year. Adjusted operating margin rose 110 basis points (bps) to 11.3%. Operating expenses rose 35% to $180.3 million in the reported quarter.
Segmental Results
Revenues in the Truckload Transportation Services (TTS) segment increased 21% on a year-over-year basis to $558.4 million. The upside can be attributed to a 68% rise in fuel surcharge revenues. Adjusted operating income increased 33% to $78.3 million. Adjusted operating margin surged 130 bps to 14%. Adjusted operating ratio (operating expenses as a percentage of revenues) improved 130 bps to 86%. Lower the value of the metric, the better.
The Logistics segment’s revenues totaled $189 million, up 37% year over year. The upside can be attributed to a 46% rise in truckload logistics revenues (led by a 24% increase in revenues per shipment and a 19% jump in shipments). The segment reported an adjusted operating income of $9.18 million, up more than 100% year over year. Adjusted operating margin was 4.9%, reflecting an improvement of 230 bps. The Other segment accounted for the rest of the top line.
Liquidity
As of Mar 31, 2022, Werner had cash and cash equivalents of $125.95 million compared with $54.2 million at 2021 end. Long-term debt (net of current portion) totaled $421.3 million at the end of the first quarter compared with $422.5 million at the end of 2021.
Outlook
Werner anticipates TTS truck growth of 2-5% for 2022 from the year-ago reported figure. Net capital expenditures are estimated in the band of $250-$300 million (previous view: $275-$325 million).
Under the TTS guidance, WERN estimates Dedicated revenue per truck per week to increase 4-6% (previous view: 3-5%) in 2022 owing to expectations of strong rates. One-way Truckload revenues per total mile are predicted to now climb 14-17% (previous outlook: 16-19%) in the second quarter of 2022 from the comparable period’s level in 2021 owing to a continued strong contractual rate increase and moderating spot rates combined with fleet mix changes.
Werner expects truck age to be 2.2 years for 2022 (commensurate with 2021), while 2022 trailer age is forecast to be 4.8 years.
Effective income tax rate is still expected to be at 24.5-25.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Werner has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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 broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Werner has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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