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Improving Freight Market Aids Werner (WERN) Amid High Costs

Rising freight volume and shareholder-friendly measures boost Werner (WERN). However, escalating expenses are worrisome.

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This story originally appeared on Zacks

We have recently updated a report on Werner Enterprises, Inc. WERN.

- Zacks

The long-term expected earnings per share (three to five years) growth rate for Werner is pegged at 11.1%. The stock has gained 15.9% in the past year compared with a 59.1% rally of the industry.

Zacks Investment ResearchImage Source: Zacks Investment Research

Werner is gradually recovering from the coronavirus-induced slump, thanks to improving freight market conditions in the United States. Revenues in the Werner Logistics and the Werner’s Truckload Transportation Services segments increased 29% and 8%, respectively, year over year in the first nine months of 2021. The Werner Logistics segment benefited from a rise in intermodal logistics volume and average trucks in service. The Werner’s Truckload Transportation Services segment was driven by higher fuel surcharge revenues.

Werner’s efforts to boost shareholders’ value via dividend payouts and shares repurchases are commendable. The company has a consistent record of paying out dividends since 1987. The latest dividend hike was in May when the company raised the quarterly dividend by 20% to 12 cents per share (48 cents annually). This marked the second dividend hike announced by the company this year.

Werner’s total operating expenses (on a reported basis) increased 9.4% to $1.76 billion in the first nine months of 2021. The metric was primarily driven by an increase in salaries, wages and benefits (up 8.5%), fuel (up 48.5%) and transportation expenses (up 20.9%). In the event of operating expenses continuing to rise in the coming quarters, the bottom line growth is likely to be hampered. This in turn might hurt the stock.

Zacks Rank & Stocks to Consider

Werner currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.

Some better-ranked stocks in the broader Zacks Transportation sector are Knight-Swift Transportation Holdings Inc. KNX, Landstar System, Inc. LSTR and C.H. Robinson Worldwide, Inc. CHRW.

The long-term expected earnings per share (three to five years) growth rate for Knight-Swift is pegged at 15%. KNX is benefitting from an improvement in the adjusted operating ratio. Notably, the adjusted operating ratio improved to 82.8% in the first nine months of 2021 compared with 86.6% in the year-ago period. In third-quarter 2021, the metric improved to 81.3% from 83.9% a year ago.  

The uptick in the adjusted operating ratio is primarily driven by increased revenues in the Trucking, Logistics and Intermodal segments. Lower the value of the metric, the better. The stock has surged 42.2% in the past year. Knight-Swift sports a Zacks Rank #1.

The long-term expected earnings per share (three to five years) growth rate for Landstar is pegged at 12%. LSTR is benefitting from a gradual recovery in the economy and freight market conditions in the United States.

LSTR’s top and bottom line increased substantially in each quarter from the third quarter of 2020, owing to robust revenues generated from the primary segment — truck transportation. The stock has returned 34.1% in the past year. Landstar carries a Zacks Rank #2(Buy).

The long-term expected earnings per share (three to five years) growth rate for C.H. Robinson is pegged at 9%. CHRW is benefitting from higher pricing and volumes across most of its service lines. Total revenues rallied 42.4% year over year in the first nine months of 2021, with higher revenues across all segments.

CHRW’s measures to reward its shareholders are encouraging. Driven by the tailwinds, the stock has  increased 5.7% in the past year. C.H. Robinson carries a Zacks Rank #2.

 



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Werner Enterprises, Inc. (WERN): Free Stock Analysis Report

 

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