Werner expects to win first quarter and spot market careers fail

Werner Enterprises maintained its 2022 outlook by calling analysts after the market closed on Tuesday. The company’s management said freight demand for the one-way truck convoy was strong at the start of the quarter, but “slowed from strong to very good in March.”

Werner (NASDAQ: WERN) Adjusted earnings per share for the first quarter was 96 cents, 9 cents higher than the consensus forecast and 28 cents higher than the previous year’s level. As a result, one-off losses, including an unrealized loss of 11 cents per share related to equity investments in autonomous technology companies, were excluded. Profit from equipment sales increased 12 cents per share year-on-year as the value of used trucks surged due to production delays between manufacturers.

This was the seventh consecutive quarter Werner posted a record adjusted EPS.

Price increases continue unabated

The one-way TL segment, which is 37% of Werner’s 8,200 unit fleet, generates only 10% of its spot market revenue. The division’s contract rate has so far increased in the low double digits by 2022 as the division remains “consistently oversold”.

One-way revenue was $ 187 million, up 19% year-on-year, with weekly revenue per truck up 11% and average trucks in operation up 7%. Dedicated fleets reported a 13% year-over-year increase in revenue as the number of fleets increased by 5% and weekly revenue per truck increased by 7%.

Approximately 60% of Werner’s cargo is retail related, most of which comes from discount stores and home improvement stores. The group’s revenue is growing as top customers record top-line growth of an average of 17%.

Derek Leathers, Chairman, President and CEO, said on the phone: “It wasn’t very common during COVID, especially in the second quarter, back to school, and normalized projects, and conversations with customers who are now back online are encouraging for us. increase.”

Werner completed 45% of contract rate negotiations in the first quarter and is currently working on an additional 25%. Of course, there have been no changes so far. The company has increased its dedicated sector’s weekly revenue guidance by 1 percentage point at both ends of the new range of 4% to 6%. Revenue forecasts per total mile for one way fell by 2 points to the range of 14% to 17%.

Table: Werner’s key performance indicators

Spot market issues are not a concern for Werner

Leathers said carriers that rely on the spot market are likely to have problems.

“I think the washout will be serious,” he said. “Because we’re chasing these spot market opportunities, we’ve seen an absolute explosion of single-vehicle registrants as a new entity. What they all have in common is that they overpay for equipment. They have paid to acquire drivers. They have been blamed for overexposure to the spot market, which has been under deflationary pressure over the last 90 days.

“But that has little to do with what we do for our lives.”

When we pushed forward with what the downside scenario would look like to Werner, the answer was down 27%. This scenario assumes that the TL margin will move from the average of 16.4% recorded over the last 12 months to the lower end of the department’s long-term range of 12%. Management is unaware that the lower bound of the range will work in the future.

The TL division’s occupancy rate in the first quarter was 83.6% (operating margin 16.4%), an improvement of 220 basis points year-on-year. Higher rates are more than offsetting cost inflation.

“I don’t think cards based on the more defensive nature of today’s portfolio include it,” Leathers added. “It’s much more durable than any previous cycle.” The comment says that the company now has “some degree of insulation” because most of the TL network operates under long-term contracts. Directed to the facts.

Operating cash flow for the quarter was $ 155 million, up 14% from the previous year. Cash on hand was $ 126 million and total liabilities were $ 426 million. Interest, taxes, depreciation and profit on net liabilities before amortization were 0.5x at the end of the quarter.

Management said it would continue to consider repurchasing and acquiring shares as a means of investing cash. We repurchased $ 36 million in shares in the first quarter.

The 2022 net capital spending budget ranged from $ 25 million to $ 250 million to $ 300 million. The reason was the delay in production.

Click here for more Freight Waves articles by Todd Maiden.

Watch: Bid volume continues to grow without impacting capacity

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