What looks like a huge increase in operating income at Werner Enterprises (NASDAQ: WERN) was impacted by reversal of liabilities that came out of its victory at the Texas Supreme Court in the long-running nuclear verdict. The size of that verdict had grown to more than $100 million with interest charges since it was first handed down in 2018. But the reversal hit Werner’s operating income for a benefit of $45.7 million. There was also a $7.9 million liability reversed related to the October 2022 acquisition of Baylor Trucking.
First indications are that investors liked the earnings report. At approximately 4:50 p.m. EDT, Werner’s stock was up 70 cts/share from the close, a gain of 2.52%.
Revenues, which are unaffected by the various charges the company took in the quarter, were down 1% year on year. But sequentially, revenues were up 5.8% from the first quarter. According to SeekingAlpha, revenues of $753.1 million exceeded the Wall Street forecast by $18.8 million.
The charges made several key indicators look strong. For example, Werner’s overall operating ratio (OR) for the quarter was 87.6%, which would have made it the most efficient truckload operator this quarter. More realistic is an adjusted corporate-wide OR of 97.5% compared to 95.7% a year ago. But that was an improvement over the 99.6% recorded in the first quarter. The Werner OR net of fuel in the quarter was 97.2%.
The one significant change Werner made in its guidance was a reduction in its net capital expenditures forecast for the year. At the end of the first quarter, that was projected to be in the $185 million to $235 million range. It’s now down to $145 million to $185 million.
There were other signs of improvement. In the Truckload Transportation Services segment, which includes both Werner’s One-Way Truckload segment and its Dedicated segment, average revenues per truck per week rose to $4,632 from $4,493 in the first quarter. That number was also slightly higher than the year-ago figure.
The fleet at Werner is slightly higher sequentially as well. It stood at 7,545 in the second quarter, compared to 7,440 in the first quarter.
Cash flow improved sequentially to $46 million from $29.4 million in the first quarter. But it was down 58% from the $109.1 million a year earlier.
Werner’s stock price is down about 29.2% in the last year. In the last three months, it has managed to eke out a small gain.
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