Universal Logistics Strong 3Q Forecast Dashed
Just two weeks after Universal Logistics Holdings Inc. offered a bright outlook for its third-quarter earnings report, the company abruptly reversed course Oct. 19, telling investors that a jury verdict will knock it back once again.
Universal Logistics was ordered to pay $54.2 million in damages Oct. 16 for a crash in February 2011 on Interstate 65 in Rensselaer, Ind., involving an owner-operator. The award to the plaintiffs will likely push the carrier back in the red, according to the figures disclosed.
On Oct. 5, the company forecast that revenue would jump 10% year-over-year to about $300 million to $305 million, operating income would improve from $10 million to between $12 million and $13.5 million and earnings would improve 3-7 cents per share.
It would’ve been the first time the Warren, Mich.-based company recorded both operating income and earnings per share growth year-over-year since the first quarter of 2015. Universal Logistics Holdings ranks No. 32 on the Transport Topics Top 100 list of the top for-hire carriers in North America.
Rogers
“The third quarter is shaping up to be a good quarter for us,” Universal’s CEO Jeff Rogers said at the time. “In addition to another quarter of double-digit revenue growth, our logistics teams did a great job of turning around a few underperforming value-added operations.”
But the ‘would have’ will not happen now, the company acknowledged in the Oct. 19 filing with the Securities and Exchange Commission, citing a Cook County, Ill., verdict in the case of Denton v. Universal Am-Can, Ltd, et al.
“The driver was braking on the expressway in order to avoid another vehicle being driven the wrong way on the interstate. The truck attempted to avoid the oncoming vehicle and the plaintiff’s vehicle and, in so doing, struck the plaintiff’s vehicle,” the company wrote in the filing.
Although victims James and Theresa Denton recovered from their injuries, the jury determined that the company and other co-defendants were jointly responsible for $19.2 million in compensatory damages. It also slapped Universal with $35 million in punitive damages, substantially more than the $2.6 million the carrier withheld on its financials above and beyond its $1 million insurance policy limit.
“This specific amount was taken into consideration when we provided earnings guidance on Oct. 5, 2017 for the third quarter 2017. Although we are in the process of finalizing our estimate, as a result of the verdict, and after considering the facts and additional analysis of outside counsel, we expect to increase this accrued liability by $15.6 million to $18.2 million,” the company acknowledged.
It continued, “While it is not feasible to predict with any certainty the outcome of this litigation, its ultimate resolution could be material to our cash flows and results of operations,” adding that the company intends to file motions on several parts of the verdict and appeal to the circuit court, if necessary.
Citi Research analyst Christian Wetherbee believes the decision will reduce earnings per share up to 25 cents, lowering his forecast to a 10 cent loss in the third quarter.
If Wetherbee’s math is accurate, Universal could announce a loss of about 3 cents a share based on the company’s previous 22-25 cent forecast on Oct. 5. One year ago, earnings per share were 18 cents.
Universal will report third-quarter earnings after the market closes Oct. 26.
