Werner warns third-quarter profit will miss badly: fuel, driver pay and an insurance reserve take $0.18 a share

Werner Enterprises warned on Monday that its third-quarter earnings will come in far below Wall Street's expectation, blaming diesel prices, driver costs and an insurance reserve adjustment, according to FreightWaves on Oct. 19.

The carrier put preliminary adjusted earnings at $0.15 to $0.16 per share for the quarter ended Sept. 30, against a consensus estimate of $0.36, and preliminary GAAP earnings at $0.10 to $0.11 per share. Revenue is expected at $946 million to $951 million, only slightly below the $953.6 million analysts expected. Werner said the quarter absorbed about $0.18 per share of cumulative cost headwinds compared with the second quarter: rapidly rising fuel prices, driver recruitment and retention investments, and a late-quarter insurance reserve adjustment related to past claims. The release offered no update to the company's earlier guidance on tractor counts or pricing.

Fuel is the mechanical problem. Truckload fuel surcharges operate on a one-week lag, and retail diesel prices rose sequentially in nine of the third quarter's 13 weeks — down 1% in July, then up 10% in August and up 15% in September. FreightWaves noted the near-term headwind becomes an earnings tailwind when prices revert.

The warning follows a similar one from J.B. Hunt Transport Services at an investor conference in mid-September; J.B. Hunt's actual third-quarter results, reported last week, came in slightly better than feared, and its management said meaningful cost increases are typical early in an upcycle while remaining bullish on pricing freight above inflation. Werner executives had struck a confident tone earlier in the quarter: unfazed in August by the post-July 4 slowdown, and reporting in September that demand among discount-retail and food-and-beverage customers held level from the second quarter, with elevated minibid activity at the one-way fleet. The company's prior guidance for the quarter called for a 10% to 13% year-over-year increase in revenue per total mile at the one-way fleet, and for revenue per truck per week at the dedicated fleet — 80% of the truckload network — to rise 3% to 5% for the full year.

Werner reports full third-quarter results on Oct. 27 after the market closes. Its shares were down 1.1% late Monday morning while the S&P 500 was up 0.7%, and the stock is off 31% from its mid-July peak.