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Schneider National Declines 4% YTD: What's Pulling it Down?

Schneider National SNDR has performed disappointingly so far this year due to headwinds like high costs. The stock has declined 3.7% against the industry’s 12% growth.

YTD Price Performance

 

Let’s delve into the factors that led to the disappointing price performance.

Schneider National’s First to Final Mile (FTFM) business has struggled lately, incurring significant operating losses. Consequently, the operating ratio (operating expenses as a % of revenues) of its truckload segment — a key revenue generating segment of the company — was hurt significantly.

Even in first-quarter 2019, income from operations at the truckload segment declined almost 50% primarily owing to FTFM's operating losses. Continued lackluster performance of the FTFM operation is likely to hurt the company's growth prospects.

High operating expenses incurred by the company are added concerns. In 2018, operating expenses increased 12% on a year-over-year basis. The increase from 2016 level is 22.5%. Operating expenses increased in first-quarter 2019 as well. Increasing purchased transportation costs have been the highest contributor to rising operating expenses.

At the company’s Logistics unit, higher brokerage volumes have pushed up purchased transportation costs. Increased driver wages have resulted in increase in salaries, wages and benefits. We expect the factors to be prevalent in the remainder of 2019 as well, thereby bumping up operating expenses. This, in turn, might limit bottom-line growth.

Additionally, we are disappointed by this Zacks Rank #5 (Strong Sell) company's decision to trim its current-year earnings guidance. The company expects earnings per share of $1.50-$1.60 for 2019, lower than the previous projection of $1.65-$1.75. The fact that the Zacks Consensus Estimate for current-quarter earnings has been revised 9.4% downward over the past 60 days highlights the negative sentiment surrounding the stock.

Stocks to Consider

Better-ranked stocks worth considering in the broader Transportation sector are Fly Leasing Limited FLY, Trinity Industries TRN and SkyWest SKYW. While Fly Leasing sports a Zacks Rank #1 (Strong Buy), Trinity and SkyWest carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fly Leasing and Trinity flaunt an encouraging earnings surprise history. While Fly Leasing outperformed the Zacks Consensus Estimate in each of the trailing four quarters, Trinity surpassed estimates in three of the preceding four quarters. Meanwhile, shares of SkyWest have surged more than 34% so far this year.

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SkyWest, Inc. (SKYW): Free Stock Analysis Report

Trinity Industries, Inc. (TRN): Free Stock Analysis Report

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Schneider National, Inc. (SNDR): Free Stock Analysis Report

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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.

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