Schneider Initial Stock Sale May Spur Growth in Truckload, Intermodal, Analysts Predict
This story appears in the April 3 print edition of Transport Topics.
Schneider’s forthcoming initial public offering may close a chapter on the company’s long- standing family ownership, but it will expand the motor carrier’s ability to broaden its horizons, industry analysts said.
“Not having all the family money tied up in the business means they do not need to be so conservative and can take some well thought-out risk,” said Mark Fornasiero, managing partner at Clarendon Group, which is based in Rockville, Maryland. Fornasiero said he expects to see Schneider increase its presence in intermodal markets and expand on its recent foray into final-mile delivery with the purchase of Watkins & Shepard and Lodeso in 2016.
Satish Jindel of SJ Consulting Group in Sewickley, Pennsylvania, said he expects to see Schneider do more to expand its drayage, intermodal and freight brokerage services. He called the company a “jewel” with a “great mix of businesses” and profit margins that rival the best in the industry.
Those profit margins will be closely watched when shares of the company begin trading on the New York Stock Exchange, something that Bloomberg News said could begin as soon as April 5.
Schneider, the nation’s second- largest truckload carrier and a major provider of intermodal and logistics services, is selling 16.8 million shares of newly issued stock, and current stockholders, principally members of the Schneider family, are selling 12.1 million shares from their holdings. According to the company’s filing with the Securities and Exchange Commission, the sale of 28.9 million shares is expected to net the Green Bay, Wisconsin-based company and its stockholders more than $500 million, based on a projected share price of $19.
The initial public offering would be the largest since Swift Transportation raised $766 million in 2010 and would value Schneider’s business between $5 billion and $7 billion with a market capitalization around $3.6 billion.
Schneider, which ranks No. 7 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, traces its origin to the earliest days of trucking, when Al Schneider sold the family car and bought a truck to haul household goods in 1935. Al’s son Don, a graduate of the Wharton School of Business, took over in the mid-1970s and led the company until his death in 2012.
Schneider officials said they plan to use a portion of the $281 million in proceeds from the sale of stock to repay debt and for general corporate purposes, including the purchase of intermodal container chassis as part of a strategy to switch from a rented-chassis business model to a company-owned chassis model. Funds also could be used to make acquisitions.
“Schneider is an iconic brand in trucking and logistics,” said Burke Smith, managing director of Headwaters MB, an investment banking firm in Denver. “With the IPO, Schneider will strengthen its balance sheet and potentially position itself for a more aggressive acquisition program.”
John Terry, a longtime trucking industry investor, offered a more critical view, recalling that Don Schneider always had firmly opposed the idea of taking the company public.
“Here’s what public ownership will do to his company,” Terry explained. “Run up costs with no benefit, waste a lot of management time, divert management and raise their pay with no benefit [and] eliminate most of the management actions that will look bad from the standpoint of next quarter’s earnings.
“In other words, nothing good and a lot of bad,” he concluded.
Regardless, at least one industry analyst believes that Schneider’s IPO will strengthen interest in trucking among investors and could spur other companies to follow its lead.
“Schneider is a well-known and well-respected company,” said Steven Dutro of Transport Capital Partners in Windsor, Colorado. “I believe Wall Street and other financial investors will be paying attention.”
A glimpse into the financial results shows that Schneider has had positive growth over the past three years.
In 2016, Schneider’s earnings increased 11% to $156.9 million, or $1 per share. In 2015, the company earned $140.9 million in profits, or 91 cents. In 2014, the numbers were $133.6 million, or 86 cents.
Revenue increased 2.2% to $4.05 billion in 2016 and by 0.4% to $3.96 billion in 2015.
Operating income, the amount left over when expenses were deducted from revenue, also rose in each of the past three years from $239.3 million in 2014 to $260.2 million in 2015 and $290.4 million in 2016.
Schneider’s operating ratio in 2016 deteriorated 40 basis points to 89.4%, but the figure has remained between 89% and 90% in each of the past three years.
Staff Reporter Ari Ashe contributed to this article.
