Werner beats expectations, used truck prices a headwind

One of the nation’s largest truckload (TL) carriers, Werner Enterprises Inc. (NASDAQ: WERN) reported adjusted earnings per share of $0.40, better than the consensus estimate of $0.35 but lower than the first quarter 2019 result of $0.52.

The result excludes $5 million in increased depreciation expense for the accelerated depreciation of trucks that will be sold in 2020. The rapid depreciation of these vehicles was to align residual values of the equipment with the weaker prices being seen in the used truck market. In addition, $1.2 million in pre-tax insurance and claims expense from an “excess adverse jury verdict” stemming from a 2018 jury award that is being appealed was excluded as well. The adjusted results did include $10 million in insurance and claims expense accrual for a “serious truck accident claim” that occurred during the quarter.

The company’s press release said that during the first quarter of 2020 freight demand was “slightly below the same period a year ago.” Even with the March surge in freight volumes, the carrier reported that demand for the month was level with the prior-year period.

April demand has “held up fairly well so far, with some expected gradual weakening given that many parts of the U.S. economy are shut down or have been significantly curtailed.” Werner expects its freight base – 62% of revenue from its top 100 customers comes from segments delivering essential goods – to hold up better than the broader economy in what the carrier believes will be “an extremely difficult economic environment in second quarter 2020.”

Management updated guidance for the year. The company now expects the change in total tractors to be 5% lower to flat when compared to the end of 2019. The prior guidance called for the tractor count to be down 3% to up 1%. Guidance for gains on the sale of tractors and trailers, booked as an offset to other operating expenses, was withdrawn due to diminished visibility and “very low” demand in the used truck market.

One-way revenue per total mile is still expected to be down 7% to 5% year-over-year in the first half partly due to tougher comparisons. Management noted a “very difficult freight market in May and June 2020.”

Net capital expenditures is still expected to be in the $260 million to $300 million range.

The company will host a conference call to discuss these results with analysts and investors today at 5 p.m. EDT.