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Werner (WERN) Down 2.7% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Werner Enterprises (WERN). Shares have lost about 2.7% in that time frame, underperforming 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 Lag Estimates

Quarterly earnings (excluding 5 cents from non-recurring items) of 60 cents per share lagged the Zacks Consensus Estimate of 71 cents. The bottom line fell 37.5% on a year-over-year basis.

Total revenues of $832.7 million outperformed the Zacks Consensus Estimate of $830.2 million. The top line increased 8.9% on a year-over-year basis primarily on higher revenues in the TTS and Logistics segments.

Operating income (adjusted) of $57.5 million fell 33% year over year. The adjusted operating margin contracted 440 basis points (bps) to 6.9%. Operating expenses rose 14.4% to $779.3 million in the reported quarter.

Segmental Results

Revenues in the TTS segment increased 5% on a year-over-year basis to $588.33 million on the back of solid freight demand. Adjusted operating income decreased 31% to $53.7 million. The adjusted operating margin fell 490 bps to 9.1%. The adjusted operating ratio (operating expenses as a percentage of revenues) improved 490 bps to 90.9%.

Logistics’ revenues totaled $228.7 million, up 21% year over year. The segment reported an adjusted operating income of $6.36 million, down 31% year over year. The adjusted operating margin fell 210 bps to 2.8%.

Liquidity

As of Mar 31, Werner had cash and cash equivalents of $130 million compared with $107.2 million at the end of December 2022. Long-term debt (net of current portion) totaled $686.25 million at the end of the reported quarter compared with $687.5 million at December 2022 end.

The company generated $166.8 million of cash from operations in first-quarter 2023. Capital expenditure amounted to $102.7 million.

In the reported quarter, Werner did not repurchase any share. As of Mar 31, WERN had 2.3 million shares available under its share repurchase authorization.

Outlook for 2023

Werner anticipates TTS truck growth between negative 2% and 1% (prior view: 1-4%) for 2023. Net capital expenditure is estimated to be $350-$400 million. Under the TTS guidance, WERN estimates dedicated revenues per truck per week to remain flat to increase 3% in 2023. The effective income tax rate is anticipated to be 24-25%.

One-way Truckload revenues per total mile are predicted to decline 3-6%. Werner expects the average truck age to be 2.2 years for 2023, while the 2023 trailer age is forecast to be five years.

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How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -13.91% due to these changes.

VGM Scores

At this time, Werner has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Werner has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Werner belongs to the Zacks Transportation - Truck industry. Another stock from the same industry, Landstar System (LSTR), has gained 1.1% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.

Landstar reported revenues of $1.44 billion in the last reported quarter, representing a year-over-year change of -27.2%. EPS of $2.17 for the same period compares with $3.34 a year ago.

Landstar is expected to post earnings of $1.89 per share for the current quarter, representing a year-over-year change of -38%. Over the last 30 days, the Zacks Consensus Estimate has changed -7.7%.

Landstar has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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