Solid first quarter earnings from Werner; operating ratio ticks favorable

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Highlights from the first quarter 2018 earnings report of Werner Enterprises:

  • Compared to the corresponding quarter of 2017, Total revenues wee up 12%, and trucking revenues, net of fuel surcharges, were up 10%. Operating income was up 35%. There was an improvement in the company’s operating ratio, improving to 91% for the quarter, from 93% from the first quarter of 2017. The earnings per share of 38 cts were 2 cts better than consensus. Revenue of $562.68 million beat revenue estimates by about $7.4 million. 
  • Beyond the numbers, virtually all of the market conditions reported by Werner were positive. Demand for its One-Way Truckload fleet was “much stronger than normal” for a first quarter. “Demand was consistently strong each month of first quarter 2018 and was broad-based geographically,” the report said. “Freight volumes thus far in April 2018 continue to be much stronger than normal.”
  • The average revenue per tractor per week was up 6.8% in the quarter, fueled by a 10% increase in average revenue per total mile, which was partly offset by a drop of 2.9% in average miles per truck. The average revenue per total mile moved higher on “higher contractual rates more freight choices with higher rates and lane mix changes.”
  • Werner’s drivers shifted away from independent owners and toward its employees. “Both company truck miles increased and independent contractor miles decreased by approximately 5 million miles,” the earnings statement said.
  • The earnings release touted steps taken to retain drivers, the same type of steps that almost every company can claim: higher pay, new fleet, better training, working with customers to “improve or eliminate unproductive freight.” But they seem to have paid off for now, as Werner said its first quarter driver turnover percentage was “one of the lowest in the last 20 years.”
  • Werner laid out how much more it is paying for diesel, and the increases are fairly stark. Overall diesel prices were up 39 cts in the first quarter of 2018 compared to the corresponding quarter of 2017. They were up 8 cts from the final quarter of 2017. And for the first 19 days of April, they ran 43 cts more than the corresponding days of April 2017.
  • “The used truck pricing market remained difficult but is beginning to show signs of improvement.”
  • Tax reform led to an effective income tax rate of 21.3% for the first quarter, which was less than the company’s expectations of 25% to 26%. The company believes that latter rate will be the expected rate going forward.
  • Werner put numbers on what the winter cost it: 3 cts per share. It’s a long list of weather-related impacts: “(I)ncreases for higher insurance and claims due to an increase in event frequency and severity; higher equipment maintenance costs for towing, road calls, jump starts and other weather-related maintenance; more workers’ compensation claims related to weather incidents; higher fuel costs due to increased truck idling; and reduced revenue due to temporary closures of our driver training schools for severe weather.”
  • Full details can be viewed at the company’s press releases here. There was no earnings call with analysts.