Schneider National, a transportation and logistics company, provided better-than-expected earnings guidance before the market opened Thursday, sending its shares higher. The company anticipates steady improvement in freight markets throughout the year.
Schneider (NYSE: SNDR) reported fourth-quarter adjusted earnings per share of 64 cents, which was 4 cents higher than Seeking Alpha’s consensus estimate but 12 cents lower year over year (y/y). A lower tax rate as a result of a change in state income taxes provided a 3-cent-per-share boost. The figure also did not include a $5 million loss on the sale of a logistics unit in China, which accounted for 2 cents per share.
For 2023, adjusted EPS guidance of $2.15 to $2.35 was issued, versus the consensus estimate of $2.15 at the time of print. The company reported full-year 2022 adjusted EPS of $2.64, which outpaced management’s initial guidance of $2.35 to $2.55 provided at the beginning of the year.
Schneider reaffirmed long-term operating margin targets for truckload (12% to 16%) and intermodal (10% to 14%). As the company continues to add trailers to support a growing power-only brokerage business, the margin outlook for the logistics segment was raised by 100 basis points on both ends of the new range (5% to 7%).
Revenue in the company’s TL segment, excluding fuel surcharges, increased 4% year on year to $545 million. The average number of trucks in service increased by 14% to more than 10,500, but revenue per truck per week decreased by 8% year on year.
Due to a prior acquisition as well as organic fleet growth, the truck count in the dedicated segment was 33% higher year on year. The dedicated revenue per truck per week was down 2% year on year. The company’s one-way TL segment, which is exposed to the spot market, saw an 11% decline in revenue per truck per week on a 4% lower tractor count year on year.
The TL segment’s operating ratio was 87.4%, 410 basis points lower year on year, as higher driver and equipment costs were offset by declining per-truck yields. Given the network’s cost pressures, management expects dedicated segment rate renewals to result in higher rates in 2023.
Intermodal revenue fell 1% year on year to $316 million, as loads fell 6% and revenue per load increased 8%. Container turns fell 15% year on year to 3.8x in the third quarter.
The company’s transition to Union Pacific’s (NYSE: UNP) rail line, which was completed during the quarter, contributed to some of the utilization headwind. Schneider will not add new containers in 2023 because it anticipates improved rail service will result in higher box turns. The goal is to return to the previous level of more than five loads per container per quarter. Schneider intends to double its intermodal franchise by 2030 and claims that the partnership with Union Pacific gives it more lane options and departure times.
The segment reported an 83.3% OR, which was 50 basis points lower year on year but 740 basis points higher than the third quarter.
Logistics revenue fell 22% year on year to $425 million, as brokerage volumes fell 5%, with lower revenue per load accounting for the remainder of the decline. A 94.3% OR was 110 basis points lower than the previous quarter.
Revenue of $1.56 billion was flat year on year, down 7% excluding fuel surcharges. The company reported an 89% adjusted OR, which was 130 basis points lower year on year. Purchased transportation as a percentage of revenue fell by 650 basis points, but all other expense lines increased.
Schneider generated $856 million in cash flow from operations, a 51% increase year over year. The company announced a penny increase in dividends to 9 cents per share, as well as a $150 million share repurchase program to offset dilution from incentive-based equity grants. The midpoint of the range for net capital expenditures in 2023 was set at $550 million.
SNDR shares were up 11.4% at 1:56 p.m. Thursday, outperforming the S&P 500, which was up 1.7%.
