Werner Enterprises‘ WERN top line is facing headwinds in a sluggish freight market environment, casting a shadow on the company’s future. Rising operating expenses are adding pressure to the company’s financial health. Soaring labor and fuel costs are taking a toll on WERN’s profitability, painting a bleak picture for potential investors.
Let’s dig deeper.
The Storm Clouds Over WERN: Key Risks
Downward Earnings Revisions: Over the past 60 days, the Zacks Consensus Estimate for WERN’s current-quarter earnings has plummeted by 33.3%. Similarly, the consensus estimate for the current year has seen a 26% downgrade during the same period. These unfavorable revisions reflect a lack of confidence among analysts in the company’s performance.
Lackluster Zacks Rank: Presently, Werner Enterprises holds a Zacks Rank #5 (Strong Sell).
Underwhelming Price Performance: WERN’s shares have dipped by 7% over the last year, contrasting with the industry’s marginal 0.2% uptick.
Image Source: Zacks Investment Research
Bearish Industry Outlook: The industry to which Werner Enterprises belongs currently holds a Zacks Industry Rank of 222 out of 251. This ranking positions it in the bottom 11% of Zacks Industries. Research indicates that half of a stock’s price movement can be correlated with the performance of its industry. Assessing industry dynamics is crucial, as a mediocre stock within a robust sector may outperform a strong stock in a weak sector.
Skyrocketing Costs: High operating expenses are hindering WERN’s profitability and endangering its financial stability. Labor and fuel costs have surged significantly, with labor expenses accounting for 35.1% of total operating costs in Q2 2024, amounting to $741.2 million. Fuel costs reached $72 million.
The downturn in the freight market has further compounded WERN’s challenges, leading to a 6% drop in its top-line compared to the previous year.
The persistent shortage of truck drivers in the industry is exacerbating supply chain disruptions across the United States. The scarcity of drivers is constraining trucking capacity, posing further difficulties for companies like WERN. The American Trucking Associations projects a shortfall of over 160,000 drivers in the trucking sector by 2030.
Alternative Investment Options
For investors seeking alternatives in the transportation sector, consider C.H. Robinson Worldwide CHRW and Westinghouse Air Brake Technologies WAB.
C.H. Robinson Worldwide currently holds a Zacks Rank #1 (Strong Buy) with an anticipated earnings growth rate of 25.2% for the ongoing year.
The company boasts an impressive track record of earnings surprises, surpassing the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 7.3%. CHRW’s shares have appreciated by 14.2% over the past year.
WAB currently carries a Zacks Rank #2 (Buy) and is expected to achieve an earnings growth rate of 26% for the current year.
Although the company has a mixed history of earnings surprises, outperforming the Zacks Consensus Estimate in three of the last four quarters with an average beat of 11.8%, WAB’s shares have surged by 61% in the past year.