Werner Reports Q2 Record for Net Income
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Werner Enterprises posted record results for net income, operating income and diluted earnings per share during the second quarter, the company announced.
The Omaha, Neb.-based freight carrier and logistics company on July 29 said net income for the quarter reached $72 million, or $1.06 a diluted share, an 84% increase from Q2 2020 net income of $39.1 million, 56 cents a share. Revenue last quarter increased 14% to $649.8 million from $569 million, while operating income increased 46% to $76.9 million from $52.8 million last year.
“I am pleased to report that Werner delivered record earnings in the second quarter, which was achieved through outstanding execution in a robust freight market with unprecedented driver and capacity challenges,” Werner CEO Derek Leathers said during a July 30 call with investors. “The Werner team worked tirelessly and creatively.”
Leathers
Werner noted that the rapidly recovering economy combined with a constrained driver market is creating labor challenges for customers and carriers alike.
“The driver shortage is as severe as I have ever seen,” Leathers said. “Traditional industry headwinds remain, including aging demographics in recruiting for the trucking life.”
However, he said Werner is “well-positioned to thrive in this business environment as a result of our consumer-oriented freight base [and] driver-preferred dedicated fleets.”
Leathers expects strong freight demand for the rest of the year and well into 2022, but noted that retail inventories require significant replenishing — which will take time.
He also pointed to cross-border operations, engineered one-way truckload lanes and capacity solutions within the logistics segment as helping the company thrive in the current business environment.
Werner’s Truckload Transportation Services segment saw Q2 revenue increase 10% to $491.2 million from $445.1 million last year. Operating income increased 43% to $73.1 million from $51.2 million.
Segment gains were driven by dedicated and one-way truckload fleets experiencing strong Q2 freight demand, even as total miles declined 12.3 million due to a higher percentage of dedicated trucks compared with total trucks, fewer team drivers and 1.3% fewer trucks on average in service. TTS company truck miles decreased by approximately 6.8 million miles, and independent contractor miles decreased by approximately 5.5 million miles.
“Dedicated freight demand remained strong in second quarter as our largest dedicated customers in discount retail, home improvement and beverage continued to generate robust sales,” Leathers said. “One-way truckload freight demand was also strong. The rapidly growing economy, combined with several factors limiting the industry capacity, resulted in excellent second-quarter freight market conditions and our one-way truckload team performed well.”
Logistics segment revenue increased 29% during Q2 to $141.7 million from $110.1 million last year. Operating income for the segment increased 25% to $3.93 million from $3.14 million. Truckload logistics revenue — which represents 69% of total segment revenue — rose by 49% on the strength of a 10% increase in volume and revenue per shipment increasing 37%. Intermodal revenue — which represents 29% of segment revenue — rose by 52% on the strength of a 30% jump in volume and 17% higher revenues per shipment.
“We made further strides in our logistics segment in the quarter, stepping up our growth in both revenues and operating income,” Leathers said. “Despite much higher capacity costs, which impacted our gross margin percentage for our contract business, improved pricing and operational efficiency led to better logistics results.”
On July 1, Werner announced it acquired an 80% equity ownership stake in ECM Transport Group for $142.4 million.
“Just after quarter-end, we added 500 trucks and skilled professional drivers to the Werner family by acquiring 80% of the regional truckload carriers of the ECM Transport Group,” Leathers said. “ECM adds 500 trucks and 2,000 trailers to our combined one-way truckload fleet and provides us with a shorthaul regional fleet presence to serve customers in the Mid-Atlantic, Ohio and Northeast geographic markets.”
For Q2, Wall Street analysts had expected Werner to post EPS of 86 cents and quarterly revenue of $642.9 million, according to Zacks Consensus Estimate.
Cowen and Co. analyst Jason Seidl noted in a report that the tight freight market led to some Q2 elevated costs for Werner in the quarter, particularly in its logistics segment. But he also noted that one-way truckload demand remained strong and contract negotiations are progressing.
“[Werner’s] revenue quarter came in just above the consensus estimate, growing 14%, with its logistics business growing 29%,” Seidl wrote in the report. He adjusted his 2021 EPS estimate for the company to $3.65 from $3.60.
Werner ranks No. 17 on the Transport Topics Top 100 list of largest for-hire carriers in North America and No. 30 on the Transport Topics Top 50 list of largest logistics companies.
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