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Schneider beats in Q3, echoes slowing demand trends

‘Muted peak season demand’ prompts carrier to dial back 2022 guidance

Schneider National modestly resets expectations for the rest of 2022. (Photo: Jim Allen/FreightWaves)

Schneider National said it was seeing steady contractual demand but that recently awarded freight from shippers isn’t being fulfilled at the same rate as it has in past years.

On a Thursday call with analysts, management said the lower fulfillment numbers reflect post-peak conditions. Shippers are also dealing with elevated inventories as many pulled forward delivery of merchandise early this year to avoid the delays seen during the 2021 peak season.

“So far in October, we are experiencing sequential volume improvement but muted seasonal peak demand and below historical average of special project programs,” Mark Rourke, CEO and president, said on the call.

Schneider (NYSE: SNDR) reported third-quarter adjusted earnings per share of 70 cents, 2 cents ahead of the consensus estimate and 8 cents higher year over year (y/y). The result included a 12-cent benefit from equity investments, which was partially offset by a 9-cent headwind from lower gains on sale.

Gains on equipment sales of $11.4 million in the third quarter were roughly one-third the level recorded in the year-ago period.

The company reeled in the top end of its 2022 full-year guidance range by 5 cents to $2.60 to $2.65, “to reflect moderating market conditions and expectations for a muted peak season,” CFO Steve Bruffett said in a news release. During the fourth quarter, gains on sale are expected to total $10 million compared to $16 million in the 2021 fourth quarter.

Table: Schneider’s key performance indicators

The company’s truckload division reported a revenue increase of 18% y/y excluding fuel surcharges as average trucks in service increased 15% y/y and revenue per truck per week was up 3% y/y. Past acquisitions of dedicated carrier Midwest Logistics Systems and regional carrier deBoer Transportation boosted the top-line result.

Revenue (excluding fuel) was up 50% y/y in the dedicated operation but down 5% in the company’s network fleet. Dedicated revenue per truck per week was up nearly 6% y/y in the quarter.

The TL segment posted an 85.4% operating ratio, 300 basis points worse y/y. The reduction in gains on sale weighed on the margin by 360 bps.

Intermodal revenue (excluding fuel) was up 13% y/y as loads increased 4%, and revenue per load was 12% higher. The container count was 19% higher y/y but average loads per container fell 13% to 4.1 in the quarter. Management said volumes were constrained by slow rail service, delays at customer facilities, difficulties taking delivery of chassis and the threat of a rail strike.

Higher dray costs and the company’s transition to Union Pacific (NYSE: UNP) for rail service in the West resulted in incremental expenses. A 90.7% OR was 620 bps worse y/y. Schneider already has 20% of its intermodal volumes moving on the UP line.

Logistics revenue fell 2% y/y after nine consecutive quarters of growth. Brokerage volumes were up 5%, which was offset by an undisclosed decline in revenue per load. The margin improved 130 bps y/y. The second quarter was the best buy-sell spread for brokerage, according to management.

Shares of SNDR were down 1% Thursday compared to the S&P 500, which was down 0.6%.

Prior to the report, the stock was down 8.5% since it reported second-quarter results on July 28. By comparison the MerQube FreightWaves Supply Chain Tech Index (SCTI) was down 9% over the same time. The SCTI measures share price performance of tech-enabled supply chain services providers like Schneider National.

Chart: (SONAR: MQFWSCTP.USA). The MerQube FreightWaves Supply Chain Tech Index (Price Returns) tracks the performance of large and liquid companies around the world identified by FreightWaves as best in class in delivering freight technology solutions. The Price Return index considers price movements (capital gains or losses) of the securities that make up the index. To learn more about FreightWaves SONAR, click here.

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Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.