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Werner missed analyst expectations in its Q2 results. (Werner Enterprises)

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Profit dropped at Werner Enterprises Inc. in the second quarter of 2024 as revenue slid more than analysts expected on the back of continued freight weakness, although executives are seeing more room for optimism from the last few weeks.

Werner ranks No. 16 on Transport Topics’ Top 100 list of the largest for-hire carriers in North America and No. 4 among truckload carriers. The company ranks No. 30 on the Top 100 list of the largest logistics companies.

Omaha, Neb.-based Werner posted a $9.2 million profit in the most recent three-month period after net income totaled $30.0 million a year earlier. The company’s diluted earnings per share fell to 15 cents in Q2 from 47 cents in the year-ago period.

Wall Street was forecasting a decline in earnings, but Werner failed to meet even those expectations. Consensus analyst expectations for Q2 were for 23 cents per diluted share and $774.54 million in revenue, .

Werner posted Q2 revenue of $760.8 million, a decrease of $50.3 million or 6% compared with $811.1 million in the year-ago period.

The Truckload Transportation Services (TTS) and Logistics divisions struggled the most. TTS revenue in Q2 saw a $33.1 million, or 6%, decline year over year, to $537.1 million from $570.2 million. Werner Logistics saw Q2 revenue drop $15.6 million, or 7%, to $208.91 million from $224.55 million a year earlier.

Werner cited the absence of gains on the sale of property and equipment in Q2 2023, a 7.1% decrease in the size of its dedicated fleet and lower One-Way Truckload revenue per total mile for TTS’ decrease in earnings.

The company’s Dedicated unit was operating 4,825 trucks at the end of Q2, or 65% of the total TTS fleet, compared with 5,260 trucks, or 63%, a year earlier.

Werner CEO Derek Leathers speaks at a conference in 2022. (Transport Topics)

“While industrywide headwinds remain, second-quarter earnings improved sequentially, and we made progress on controlling the controllables. One-Way Truckload production increased for the fifth consecutive quarter. Mexico and cross-border related business is growing double-digits. [Werner’s Dedicated unit] revenue per truck was up, and the Logistics segment returned to positive operating income,” CEO Derek Leathers said in a statement accompanying the results.

The TTS division posted an operating ratio of 96.1 in the most recent quarter, 400 basis points weaker than the year-ago period’s 92.1.

Operating ratio provides insight on how well a company is balancing its costs and revenue generation. The lower the ratio, the better a company’s performance.

Looking forward, Leathers is cautiously optimistic. “Despite a lower for longer freight backdrop, Dedicated has demonstrated resiliency and durability. The prolonged environment combined with our pricing and margin discipline resulted in a lower Dedicated fleet size at the end of the quarter. However, the pipeline of opportunities in Dedicated remains strong,” he said during the company’s quarterly earnings call July 30.

“In short, while we are encouraged to see positive signs of an improving market, we need more evidence over a longer period before we can call a definitive inflection from the unprecedented freight downturn,” he said.

“Challenges remain and our results continue to reflect a smaller Dedicated fleet pressure on One-Way rates as previously negotiated contract renewals become effective,” he added.

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Werner Chief Financial Officer Chris Wikoff told analysts there had been a demand improvement among some existing customers, although this was not widespread as yet.

Leathers said the last few weeks had added to optimism among the Werner leadership.

“One-Way freight conditions in particular improved midway through [Q2] and continued into July. We experienced a tighter environment during [International Roadcheck in May], which led to improving spot rates, and those gains have held,” he said.

“[There’s] lots of signs that seem to be indicating a return to kind of normal seasonality right now. We’ve seen things like the stickiness of Roadcheck and it kind of having enduring the period post-Roadcheck, at least in our network, relative to spot rates,” Leathers said.

“All of that kind of leads me to believe, although it’s still early and we’re certainly not predicting an inflection point on the call today, that things are starting to feel back to normal,” he told analysts.

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