Werner Enterprises’ WERN bottom line is buoyed by a decline in operating expenses. The adoption of shareholder-friendly initiatives bodes well for the company. However, headwinds like low segmental revenues and substantial debt weigh on WERN's financial performance.
Factors Favoring WERN
Werner Enterprises’ efforts to reward its shareholders through dividends and share repurchases are commendable. The company has a robust history of paying dividends to its shareholders. In the third quarter of 2024, WERN declared a cash dividend of 14 cents per share and repurchased 1.6 million shares at an average price of $37.04 per share, totaling $60.0 million. As of Jun 30, 2024, Werner had 3.9 million shares remaining under its new repurchase authorization approved in May 2024.
Declining operating expenses are boosting the company’s bottom line. In the second quarter of 2024, WERN’s operating expenses fell by 5% year over year.
WERN’s comprehensive sustainability efforts are another major tailwind for the company. In the third quarter of 2024, the company was recognized as “a 2024 Green Supply Chain Partner” by Inbound Logistics for the 12th consecutive year. Such initiatives include ambitious greenhouse gas emission reduction goals, aiming to reduce emissions by 55% by 2035.
The company has also integrated innovative fleet technologies such as compressed natural gas (CNG) engines, Class 8 battery electric vehicles, a hydrogen fuel cell truck and trailer aerodynamics enhancements. Additionally, Werner actively participates in the EPA's SmartWay Transport Partnership and collaborates exclusively with SmartWay-certified carriers.
Werner exited the June end quarter of 2024 with a current ratio (a measure of liquidity) of 1.69. A current ratio of more than 1 indicates that the company has sufficient cash to meet its short-term obligations.
Key Risks
Werner is suffering from weak freight demand. As a result of the weakness in the freight market, management gave a bearish 2024 guidance regarding the Truckload Transportation Services (“TTS”) segment. For 2024, Werner now anticipates TTS truck growth to decline in the range of 6%-3%.
Net interest expenses of $7.3 million increased from $1.0 million, primarily due to higher interest rates for variable-rate debt and the impact of replacing lower-cost debt and interest rate swaps with higher-cost debt and interest rate swaps upon maturity.
Shares of WERN have declined 12.5% in the past year compared to its industry’s decline of 0.4% in the same period.
Image Source: Zacks Investment Research
Zacks Rank
WERN currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide CHRW and Westinghouse Air Brake Technologies WAB.
C.H. Robinson Worldwide currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. CHRW has an expected earnings growth rate of 25.5% for the current year.
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 7.3%. Shares of CHRW have risen 6.8% in the past year.
WAB holds a Zacks Rank #1 at present and has an expected earnings growth rate of 26% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 11.8%. Shares of WAB have climbed 44% in the past year.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
