Werner Enterprises Q3 Earnings Call Highlights

Key Points

• Werner’s third-quarter revenue rose 23% to $951 million, while adjusted EPS was $0.16 and adjusted operating income nearly doubled to $21 million. Results benefited from Dedicated growth, the FirstFleet acquisition, fuel surcharge revenue and improved asset productivity, despite fuel, recruiting and insurance costs.
• Dedicated operations and FirstFleet integration were major strengths: Dedicated revenue excluding fuel surcharges increased 52%, revenue per truck per week rose nearly 6%, and Werner remains on track for its $18 million in FirstFleet synergies. The One-Way segment also returned to profitability as revenue per truck per week climbed 34% following network restructuring.
• Management expects modest sequential EPS improvement in the fourth quarter as fuel and insurance pressures ease, supported by peak-season demand and pricing momentum. Full-year guidance includes 16%–17% TTS truck-count growth, 4%–5% Dedicated revenue-per-truck growth, and lower net capital expenditures of $190 million–$205 million.

Werner Enterprises NASDAQ: WERN reported third-quarter revenue of $951 million, up 23% from a year earlier, as growth in its Dedicated business, the FirstFleet acquisition, fuel surcharge revenue and improved asset productivity supported results. Adjusted diluted earnings per share were $0.16, while adjusted operating income rose 92% to $21 million.

Management said the quarter included roughly $0.18 per share of sequential pressure from rising fuel costs, investments in driver recruiting and retention, and unfavorable insurance reserve development tied to select FirstFleet claims. Despite those costs, Chairman and CEO Derek Leathers said the company’s One-Way network restructuring and Dedicated expansion were producing higher yields, improved productivity and structural cost efficiencies.

Dedicated growth and FirstFleet integration

Dedicated revenue excluding fuel surcharges increased 52% year over year, while revenue per truck per week rose nearly 6%. Werner added 130 net Dedicated trucks sequentially, aided by increased recruiting activity, and said customer retention remained above 95%.

Dedicated represented 77% of Truckload Transportation Services, or TTS, trucking revenue during the quarter, compared with 65% a year earlier. The Dedicated fleet accounted for 81% of TTS trucks at quarter-end. On Werner’s legacy Dedicated fleet, revenue per truck per week increased 7%, according to Chief Financial Officer Chris Wikoff.

Management said FirstFleet, acquired earlier in the year, continued to perform ahead of acquisition targets. Werner reported nearly $6 million in savings during the first eight months following the transaction, contributing more than 160 basis points of margin improvement. The company said it has identified initiatives representing more than $11 million in annualized savings and remains on track to achieve its $18 million synergy target.

Leathers said Werner has achieved a 98% renewal rate on more than 85% of the FirstFleet portfolio that has come up for renewal. He also said Dedicated bid activity was at record levels as shippers sought reliable capacity in a tightening freight market.

One-Way turnaround gains traction

Werner’s One-Way Truckload business continued to improve following its network restructuring, though revenue remained lower because of a smaller fleet. One-Way trucking revenue excluding fuel fell 15% to $136 million, while average trucks declined 37% year over year to 1,673.

However, revenue per truck per week increased 34%, driven by a 22% increase in miles per truck and a 10% gain in revenue per total mile. The segment’s adjusted operating margin improved by more than 800 basis points from the prior-year period, moving from a loss to a profit, management said.

More than 85% of Werner’s One-Way portfolio was repriced at higher rates through the first three quarters of the year. Chris Neil, senior vice president of pricing and strategic planning, said the company expects another season of rate increases in 2027 as it seeks to restore One-Way margins to “reinvestable and sustainable levels.” He said early opportunities in the 2027 bid season would likely require double-digit increases on average, although pricing decisions remain customer-specific.

Leathers said the One-Way restructuring resulted in more fleet shrinkage than management had anticipated, partly because drivers did not always relocate with changes in freight geography. Still, he said the network is now aligned with the company’s targeted markets and freight mix, positioning it for future fleet growth.

Logistics returns to positive operating income

Logistics revenue declined 7% year over year to $216 million but rose 2% sequentially. The segment returned to positive adjusted operating income, posting a 0.4% adjusted operating margin, up 170 basis points from the second quarter.

Truckload logistics revenue was down 13% year over year on 40% fewer shipments, partly offset by a 44% increase in revenue per load. Higher contract rates and improved mix helped expand logistics gross margin by more than 200 basis points sequentially.

Werner also reported growth in Intermodal and Final Mile. Intermodal revenue rose 7%, supported by higher load volumes and a 6% increase in revenue per load. Final Mile revenue increased 18% year over year and 8% sequentially to a record high.

Fuel volatility, driver investments and outlook

Wikoff said rapid diesel price increases created a temporary margin headwind because fuel surcharges recover costs with a lag. Leathers said the lag is generally about one week, but persistent weekly price increases can compound the effect. Werner also said it worked with some customers during the quarter to modify fuel recovery programs where regional pricing differences and contract provisions reduced recovery effectiveness.

Meanwhile, Werner increased spending on driver advertising, recruiting, training, instructors, onboarding and incentives to support committed freight and seat additional trucks. Leathers described much of the expense as front-loaded rather than structural labor inflation. Management expects recruiting investments to continue at a measured pace in the fourth quarter and potentially into the first quarter of 2027.

Werner said its DOT-preventable accidents per million miles were down more than 40% year to date, reaching their lowest level in more than 20 years. Insurance costs were nevertheless affected by unfavorable development on select FirstFleet claims, which management expects to be contained to the third quarter.

For the fourth quarter, Wikoff said Werner expects modest sequential improvement from third-quarter adjusted EPS of $0.16. The company expects most of the fuel and reserve-development pressure to abate, while peak-season demand, rate momentum and a larger active fleet support results. Those benefits may be partly offset by lower gains on equipment sales, higher interest expense and tax normalization.

• Full-year TTS average truck count growth guidance was narrowed to 16% to 17%.
• Dedicated revenue per truck per week guidance was raised to an increase of 4% to 5% for the full year.
• Werner expects fourth-quarter One-Way revenue per total mile to rise 10% to 13% year over year.
• Net capital expenditure guidance was lowered to $190 million to $205 million, primarily due to OEM delivery timing.
• Expected gains on sales of used equipment and revenue-generating assets were raised to $14 million to $16 million.

Werner ended the quarter with $654 million of liquidity, including $39 million of cash and $615 million available under credit facilities. In October, the company entered a new $1.1 billion unsecured credit facility with a five-year maturity, lower borrowing costs and additional capacity for investment. Total debt at quarter-end was $847 million, while covenant-defined pro forma net leverage was 1.9 times.

About Werner Enterprises (NASDAQ:WERN)

Werner Enterprises, Inc is a transportation and logistics company headquartered in Omaha, Nebraska. Founded in 1956 by Clarence L. Werner, the company provides freight transportation and supply chain services to customers across North America.

The company's operations include truckload transportation, dedicated transportation, and regional truckload services. Werner also provides logistics services, including freight brokerage, intermodal transportation, cross-border transportation, and supply chain management solutions.

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