Schneider National slightly missed first-quarter expectations and cut its full-year earnings outlook by nearly 25%. It noted some improving trends on a Thursday call with analysts but concluded it’s “not calling an inflection in the market.”
The most surprising takeaway from the call was the disclosure that truckload contract price renewals were positive for the first time in six quarters. For contracts renewing in the period, pricing increased by a low-single-digit percentage.
The company said it took share within some accounts at higher rates, which was partially offset by lost share at accounts that were still looking to “extract more [rate] from a marketplace that we don’t think is sustainable,” President and CEO Mark Rourke said on the call.
Schneider (NYSE: SNDR) reported first-quarter adjusted earnings per share of 11 cents, 1 cent below the consensus estimate and 44 cents lower year over year (y/y). The adjusted result excluded just 1 cent in acquisition-related amortization expense.
Lower gains on equipment sales were a 4-cent headwind y/y, and lower gains on equity investments were an 8-cent drag.
The company reduced its full-year EPS guidance to a range of 85 cents to $1 from the prior guide of $1.15 to $1.30, as the downcycle has “persisted for far longer than originally contemplated.”
“We still believe the cycle is closer to its end than its beginning and anticipate improving conditions as the year progresses; however, we have tempered our outlook on the timing of the recovery,” said CFO Darrell Campbell in a news release.
The outlook calls for “a return to some degree of seasonality” and “modest sequential improvement in market conditions for the remainder of the year,” Campbell said. Improving yields, volume growth in the intermodal and logistics units, as well as continued dedicated truck count growth are some of the levers. Gains from equipment sales are expected to be a $30 million y/y headwind.
The 2024 consensus estimate was $1 at the time of the print. Schneider reported adjusted EPS of $1.37 last year.
Table: Schneider’s key performance indicators
Truckload revenue was basically flat y/y at $538 million excluding fuel surcharges. A 4% increase in the average truck count was offset by a 4% decline in revenue per truck per week. A prior acquisition of a dedicated fleet offset the falloff at the company’s one-way fleet.
Dedicated revenue was up 13% y/y to $341 million due to the August acquisition of M&M Transport Services, which had 500 trucks at the time. Revenue per truck per week was flat y/y (down 4% sequentially).
The one-way segment saw a 16% y/y decline in revenue to $196 million, the combination of a 7% decline in average trucks in service and a 10% decline in revenue per truck per week (down 7% sequentially).
The TL unit recorded a 97.2% adjusted operating ratio, which was 890 basis points worse y/y and 60 bps worse than the fourth quarter. A soft freight market, lower gains on sale, launch costs for new dedicated contracts and general cost inflation were the culprits.
On a consolidated basis, salaries, wages and benefits expenses were up 330 bps y/y as a percentage of revenue. Depreciation and amortization expenses and the costs of operating supplies were up by 140 bps and 130 bps, respectively.
Intermodal revenue declined 7% y/y to $247 million as revenue per load fell by the same percentage. Load count was flat y/y in the quarter with volumes in the West and northbound from Mexico moving higher by an undisclosed percentage, but offset by demand weakness in a truck-competitive Eastern intermodal network. Management said contract renewals were flat with the 2023 first quarter, which was the toughest y/y comparison it faces this year.
Compared to the fourth quarter, intermodal loads were down 6% and revenue per load was off 2%. The unit recorded a 97.2% OR, 850 bps worse y/y but 40 bps better sequentially.
Logistics revenue dropped 15% y/y to $325 million due an 8% decline in brokerage loads and likely a similar decline in revenue per load. The segment posted a 98.3% OR, 310 bps worse y/y and 10 bps worse sequentially.
Shares of SNDR were up 2.3% at 12:09 p.m. EDT Thursday compared to the S&P 500, which was up 0.4%.
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