Werner optimistic after tough Q4

Management from Werner Enterprises noted some green shoots on a Thursday quarterly call but the period was marred by unfavorable claims developments.

Werner (NASDAQ: WERN) reported fourth-quarter adjusted earnings per share of 8 cents after the market closed, 14 cents below the consensus estimate and 31 cents lower year over year. The number included a $19 million hit, or 22 cents per share, from unfavorable changes in liability claims.

The company said the “unprecedented rise in verdicts and litigation settlements” came despite operating at “near 20-year record lows in U.S. Department of Transportation preventable accidents per million miles.”

Werner has made significant investments in collision-avoidance technology and has numerous safety initiatives in place but one claim erases those efforts.

“You can have a phenomenal year and even have, on the handful of claims, really good facts [surrounding the case], and it doesn’t necessarily always lead to a good outcome,” said Chairman and CEO Derek Leathers on the call.

He noted progress on tort reform in some states but said the industry still has a long road ahead to fix its insurance issues.

“We’re seeing ongoing progress being made at state levels where we’re getting some rationality into the room relative to how liability should be treated so some day we don’t wake up with $35-a-dozen eggs,” Leathers said.  

Looking past the insurance headwinds, he called out some green shoots in the truckload market like an increase in tender rejections and the move off the bottom for spot rates. He said unlike the past two years, external impacts like winter storms now cause a reaction to rejections and rates.

The company is seeing low- to mid-single-digit rate increases so far in the one-way TL bid season.

Q4 highlights and outlook

The adjusted EPS result excluded nonrecurring items like acquisition-related expenses, costs from an insurance claim that was appealed and gains from equity investments. Gains on the sale of equipment, which are included in the number, were down 55% y/y to $1.4 million. (Lower gains on sale were a 2-cent headwind at a normalized tax rate.)

Revenue in the TL segment declined 9% y/y to $527 million. Average trucks in service declined by a high-single-digit percentage in both the dedicated and one-way fleets. That was partially offset by a 5.1% increase in revenue per truck per week (excluding fuel surcharges) in one-way and a 1.1% increase to the metric in dedicated.

The TL unit reported a 96.9% adjusted operating ratio (inverse of operating margin), 440 basis points worse y/y. The jump in insurance expense was a nearly 400-bp margin headwind for the segment during the quarter.

The company is forecasting revenue per truck per week at the dedicated fleet to be flat to up 3% y/y for full-year 2025. One-way revenue per total mile is expected to increase by 1% to 4% in the first half of the year.

The logistics unit reported a 6% y/y revenue decline to $213 million and a small operating profit. The adjusted operating margin was 1.1%, 20 bps worse y/y. This was the best quarter for the segment in 2024.

Werner outlined an additional $25 million in cost savings for 2025 to go along with the $100 million savings run rate achieved over the past two years. First-quarter adjusted EPS is expected to be roughly in line with the 14 cents earned in the 2024 first quarter, which was 3 cents light of the consensus estimate at the time of the print.

More FreightWaves articles by Todd Maiden:

• XPO shares up on strong Q4 financial performance
• Old Dominion poised to take share when market turns
• Pricing index logs fastest growth rate since freight recession began

The post Werner optimistic after tough Q4 appeared first on FreightWaves.