Freight delivery company Werner (NASDAQ:WERN) fell short of the market’s revenue expectations in Q4 CY2024, with sales falling 8.2% year on year to $754.7 million. Its non-GAAP profit of $0.08 per share was 63.1% below analysts’ consensus estimates.
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Werner (WERN) Q4 CY2024 Highlights:
- Revenue: $754.7 million vs analyst estimates of $761.4 million (8.2% year-on-year decline, 0.9% miss)
- Adjusted EPS: $0.08 vs analyst expectations of $0.22 (63.1% miss)
- Market Capitalization: $2.15 billion
Company Overview
Conducting business in over a 100 countries, Werner (NASDAQ:WERN) offers full-truckload, less-than-truckload, and intermodal delivery services.
Ground Transportation
The growth of e-commerce and global trade continues to drive demand for shipping services, especially last-mile delivery, presenting opportunities for ground transportation companies. The industry continues to invest in data, analytics, and autonomous fleets to optimize efficiency and find the most cost-effective routes. Despite the essential services this industry provides, ground transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.
Sales Growth
A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Werner’s sales grew at a sluggish 4.2% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Werner’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 4% annually. Werner isn’t alone in its struggles as the Ground Transportation industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time. 
Werner also breaks out the revenue for its most important segments, Truckload Transportation and Logistics, which are 69.9% and 28.2% of revenue. Over the last two years, Werner’s Truckload Transportation revenue (deliveries made with Werner's fleet) averaged 6% year-on-year declines. On the other hand, its Logistics revenue (brokered deliveries using third-party fleets) averaged 3.2% growth.
This quarter, Werner missed Wall Street’s estimates and reported a rather uninspiring 8.2% year-on-year revenue decline, generating $754.7 million of revenue.
Looking ahead, sell-side analysts expect revenue to grow 4.3% over the next 12 months. Although this projection indicates its newer products and services will spur better top-line performance, it is still below average for the sector.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Werner was profitable over the last five years but held back by its large cost base. Its average operating margin of 7.8% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.
Analyzing the trend in its profitability, Werner’s operating margin decreased by 6 percentage points over the last five years. The company’s performance was poor no matter how you look at it - it shows operating expenses were rising and it couldn’t pass those costs onto its customers.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Sadly for Werner, its EPS declined by 25.9% annually over the last five years while its revenue grew by 4.2%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.
We can take a deeper look into Werner’s earnings to better understand the drivers of its performance. As we mentioned earlier, Werner’s operating margin declined by 6 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Werner, its two-year annual EPS declines of 62% show it’s continued to underperform. These results were bad no matter how you slice the data.
In Q4, Werner reported EPS at $0.08, down from $0.39 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Werner’s full-year EPS of $0.53 to grow 128%.
Key Takeaways from Werner’s Q4 Results
We struggled to find many positives in these results. Its EPS missed significantly and its revenue fell slightly short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 3.6% to $33.40 immediately following the results.
Werner’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
