In an announcement that is along the lines of what less-than-truckload (LTL) carriers do virtually every quarter, truckload carrier Werner (NASDAQ: WERN) has released an update on its first-quarter operations.
The release held no major surprises about conditions so far in the quarter. Regarding the recent surge in trucking demand, Werner said its March book in its truckload division this year was comparable to March of last year, “with demand strengthening in the latter two weeks of March 2020.”
But between February and March, demand in the latter month “has not declined sequentially from February as we expected it would, due in part to increased replenishment shipments from many of our core customers.”
However, the size of the one-way truckload fleet is being reduced from its end-2019 level of 3,370 trucks “to adjust to changing market conditions.”
That isn’t a surprise. In its guidance for full-year 2020, the company had projected that growth in its truck division would be negative 3% to plus 1%. It foresaw a “flat to slightly lower truck count in the first half of 2020 due to current market conditions.”
Both rates and miles per truck are sequentially higher in March from January and February of this year, the company said. It did not offer specific figures.
In its guidance for the first half of 2020 issued in early February, Werner said its revenues per total mile would decline 5% to 7% compared to 2019. “RPTM comparisons are expected to remain difficult in the first half of 2020,” the company said then.
Freight demand in January and February was “seasonally normal and slightly lower than the same period a year ago,” Werner said in its update.
In a March 13 research report, Bank of America Merrill Lynch’s transportation research team said of Werner: “Pricing is trending well above targets given the strong demand market, partially offset by reduced miles/tractor given mix impacts from its Dedicated focus.”
As far as the reason for the unusual release, Werner noted “unprecedented times” and that it wanted to discuss “how Werner is proactively navigating the fast-changing landscape.”
Werner’s guidance in February did not change in the update. However, the company said it will be “reevaluating those guidance metrics as we prepare for our first quarter 2020 earnings release” on April 28.
In that guidance, Werner did not project first-half or full-year earnings.
Werner’s Dedicated division is heavily tied to retail. In its update, Werner said demand in the Dedicated division “has remained steady with some above normal demand for store replenishment in March.”
“Customer bid activity remains solid,” Werner said. “However, customer decisions are being delayed as they attempt to get more clarity on the impact of COVID-19.”
Its logistics division, accounting for 20% of total revenues last year, is facing a tougher market, Werner indicated. Brokerage volumes are “challenged” and “lower due to the slowing freight economy.” Gross margins are “challenged” this month “as the cost of capacity increased due to higher replenishment activity.”
The company’s cash stockpile has grown considerably. Werner listed $26.4 million of cash at the end of last year. In its update, it said that had grown to $61 million.
“We have a strong balance sheet and ample liquidity,” Werner said in its update.
Werner’s stock is slightly lower for both the one-month and three-month period — minus 0.04% and minus 1.45%, respectively — and slightly higher for the 12-month period, up 1.45%, according to Barchart. It closed Thursday at $34.84, down 7 cents.
