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Werner Enterprises reported steady revenue but a decline in net income during the first quarter of 2020, and the company said it is positioning itself to navigate the freight environment going forward amid the COVID-19 pandemic.
“Our leadership team has been meeting daily to discuss and address issues related to our customers, freight, drivers, safety, staffing, human resources and cost structure,” CEO Derek Leathers said April 28 during a conference call with investors and analysts to discuss the quarter.
For Q1, Omaha, Neb.-based Werner saw net income decline 36% to $23.1 million, or 33 cents per diluted share, compared with $36.1 million, or 51 cents, a year ago. The total revenue slipped by 1% to $592.7 million from $596.1 million. Analysts polled by Zacks Consensus Estimate were expecting earnings per share of 35 cents on revenue of $574.84 million.
Werner’s Q1 truckload transportation services segment saw revenues increase less than 1%, to $464.9 million from $462.9 million, while operating income decreased by 32% to $29.1 million from $43 million.
Werner said a 3.2% increase in average revenue per truck was offset by a $7.1 million decrease in fuel surcharge revenues. The higher revenues per truck were attributed primarily to an improvement in average miles per truck, and to a lesser extent an increase in average revenues per total mile.
Werner’s logistics segment saw Q1 revenue decrease by 4% from $117.4 million to $112.2 million, while operating income fell 77% to $1.1 million. Truckload logistics revenue, which represents 64% of the logistics segment’s overall revenue — declined 9%, which the company attributed to fewer transactional freight opportunities from a slowing freight economy and the competitive logistics market.
“Our results in first-quarter 2020 reflect freight demand that was slightly below the same period a year ago,” Leathers said in the earnings news release. “Following the pandemic declaration on March 11, we experienced above- normal demand for two to three weeks as consumers purchased essential products for their homes. This led to demand for the full month of March 2020 being comparable to March a year ago.”
He added, “April 2020 freight demand has held up fairly well so far, with some expected gradual weakening given that many parts of the U.S. economy are shut down or have been significantly curtailed. Our freight base is designed to more effectively manage through what we anticipate will be an extremely difficult economic environment in second-quarter 2020, as a significant portion of our revenues come from delivering essential goods and products. 62% of revenues from our top 100 customers (85% of revenues in first-quarter 2020) came from the discount retail, home improvement retail, food and beverage or consumer packaged goods verticals.”
Credit Suisse Group analyst Allison Landry noted in a report that these segments of Werner’s business should help it manage through Q2.
Leathers added during the call that the company has limited discretionary spending in the wake of the pandemic, and said members of the executive team have taken pay cuts. Leathers took a voluntary 25% pay reduction.
That said, he noted that the company remains focused on bolstering its ranks where appropriate.
“The labor market is challenging with the rapid rise of the national unemployment rate the last few weeks and we remain committed to our rigorous hiring processes,” Leathers said. “In our terminal network, we implemented social distancing and other safety procedures to enable our mechanics to continue to maintain our trucks and trailers.”
Leathers added Werner is also utilizing enhanced technology tools to orient and train drivers.
Werner ranks No. 15 on the Transport Topics Top 100 list of largest for-hire carriers in North America and No. 17 on the TT Top 50 largest logistics companies list.
“The second-quarter 2020 results will likely be further impacted by the disrupted effects of COVID-19,” he said during the call. “This disruption is difficult to predict. However, we are preparing for various scenarios and expect an extremely challenging second quarter based on the anticipated double-digit percentage decline in the second-quarter U.S. GDP data.”
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