Schneider National reported a giant earnings miss Thursday and cut its outlook for the rest of the 12 months.
Adjusted earnings per share of 20 cents were below a consensus estimate of 37 cents, a second-quarter results of 45 cents and a year-ago results of 70 cents.
“Our results were driven by ongoing price pressures primarily in our network businesses, in addition to other headwinds akin to fuel, bad debt, and lower equipment gains,” President and CEO Mark Rourke said in a news release.
Retail diesel prices were off 15% 12 months over 12 months (y/y) within the quarter but increased greater than 20% from the start to the top of the period, which didn’t allow fuel surcharge mechanisms to maintain pace. Combined with a rise in bad debt expense because of customer bankruptcies and lower gains on equipment sales, the full impact was $18 million, or 8 cents per share.
Lower gains from equity investments were a ten cent headwind y/y. A lower tax rate was a 1 cent tailwind, which was offset by a 1 cent headwind from higher interest expense because of a rise in debt from an acquisition.
Schneider (NYSE: SNDR) cut 2023 EPS guidance to a variety of $1.40 to $1.45, a 22% reduction from the August forecast and well below a consensus estimate of $1.78. The corporate’s initial 2023 EPS guidance was $2.15 to $2.35 in early February.
The corporate doesn’t expect a lift in volumes within the fourth quarter as seasonal project opportunities did not materialize. Lower gains on equipment disposals will again be a headwind. Nevertheless, it expects fuel costs to moderate and noted further rate reduction is unlikely as all of its contracts from the recent bid season have been repriced.
Schneider is expecting 2024 to be a “transition 12 months” with slow and regular improvement in fundamentals.
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Truckload revenue fell 6% y/y (up barely in comparison with the second quarter) to $535 million. Revenue per truck per week was down 16% y/y in the corporate’s one-way segment, partially offset by a 2% increase within the dedicated fleet. The metric was off 2% from the second quarter when combining each fleets.
The dedicated fleet’s contribution of total TL revenue increased to 61% from 54% a 12 months ago. In August, Schneider acquired dedicated carrier M&M Transport Services, which was operating 500 trucks on the time.
The TL segment’s adjusted operating ratio deteriorated 1,000 basis points to 95.4% because of lower one-way rates, lagging fuel surcharges, costs to onboard latest dedicated customers and an uptick in bad debt expense. The adjusted OR was 760 bps worse than the second quarter.
Management said customer conversations around contract renewals and pricing are getting more constructive. Schneider will proceed to cut back its spot market exposure and noted that there’s little room left to maneuver lower on contract rates.
“The bites have been taken out of the apple and there’s no apple left,” said retiring CFO Steve Bruffett on a Thursday call with analysts.
Intermodal revenue was down 21% y/y (up 1% from the second quarter) to $263 million. Loads were off 9% y/y and revenue per load was down 16%. Intermodal volumes improved throughout the quarter and thru October. Average container turns fell 5% y/y but improved 4% sequentially.
The segment recorded a 95.8% OR, which was 510 bps worse y/y and 490 bps worse sequentially.
Logistics revenue was off 30% y/y (down 5% from the second quarter) to $326 million. Brokerage loads were down 11% y/y with declines in revenue per load closing the gap on the general revenue decline. The unit’s OR deteriorated 340 bps y/y to 97.4%.
Shares of SNDR were off 10.7% at 11:53 a.m. EDT Thursday in comparison with the S&P 500, which was up 1.4%.
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