Werner's third quarter numbers were strong, and its outlook going forward is still bullish

  Photo: Truckstockimages

Photo: Truckstockimages

A few months ago, Werner Enterprises released the results of a strong second quarter, and trucking stocks counter-intuitively cratered in response as investors feared a top had been reached.

The truckload carrier’s third quarter earnings report was positive once again and show no sign of a top having been reached.  Revenues of $629.7 million were up 19% from the corresponding quarter of 2017, and were also up more than $10 million from the second quarter that some investors feared was a high point.

There was almost nothing negative to find in Werner’s earnings report. Revenue net of fuel surcharges was up 17% from 2017’s third quarter, which is slightly less than total revenues that include the surcharge income. The $409 million in revenue net of fuel surcharge was also more than the approximately $395 million posted in that category during the second quarter.

Werner’s operating ratio improved to 87.9% with the fuel surcharge and 85.9% without. That is an improvement of 380 basis points with the surcharge and 460 basis points without, a significant jump.

The increase in that operating ratio helped propel net income to $47.5 million, up a whopping 111% from the prior year.

Werner also gave a sneak peak into how things are going as the fourth quarter has begun. “Much stronger than normal” is how Werner described one-way trucklod fleet demand in July, and “stronger than normal” was the term used to describe demand in August, September and October.

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Werner’s average trip length dropped to 451 miles from 469 miles, which the company ascribed to a rise in traffic in the company’s Dedicated sector. Average miles per truck in the One-Way Truckload sector was up for the quarter, though specific numbers were not disclosed.

In other highlights from the earnings report, Werner said:

--Its driver turnover rate was one of the lowest it has had in the last 20 years.

--It significantly shifted a lot of miles to company-owned trucks. Miles drive by those trucks were up about 8 million miles while miles driven by independent contractors dropped about 2 million miles. As a result, there was a slight decline in the percentage of expenses accounted for by the rent and purchased transportation line item, though total dollars were higher.

--Although there are some signs the used truck market may have hit a peak, Werner said the market for its used trucks has “improved” over the last few quarters.

Although Werner does not hold a conference call with analysts, the team at Deutsche Bank led by Amit Mehrotra had a follow-up call with Werner executives after the earnings. It resulted in Deutsche raising its projections on earnings per share at Werner going forward, up 1 cent in 2019 to $2.65 per share, and a more significant increase in 2020 to $2.81 from its own estimate of $2.63 and a consensus view of $2.72.

“At a high level, October trends (as measured by load-to-truck ratio) represent the 3rd best October in over a decade, and we believe at least +5% revenue per total mile is achievable in 2019- reflecting current contractual rate increases in the 9-11% range,” Deutsche said in a note to investors released early Friday. “While we continue to expect headwinds on utilization in ’19 (miles per tractor down 1-2%), this should be more than offset by lower wage inflation- which we expect to moderate to +5% per total mile vs. +15% in 2018.”