Schneider Reports A Miss, Lowers Guidance And Shutters A Division

Schneider National, Inc. SNDR announced second quarter 2019 adjusted earnings per share (EPS) of $0.34, a penny light of the consensus estimate and $0.06 lower than the second quarter of 2018. Notably, the company announced the closure of its First to Final Mile (FTFM) service offering, which had been a drag on earnings.

Closing FTFM

The truckload (TL) carrier's FTFM network consisted of 26 terminal locations with nationwide service for business-to-business and business-to-consumer movements of household durable goods. In an 8-k filed with the Securities and Exchange Commission, the company said that it expects to incur pre-tax restructuring charges of $50 million to $75 million due to the closure. Further, these charges are separate from the $34.6 million goodwill impairment recorded in second quarter 2019.

"We have made the difficult decision to execute a structured shutdown of our FTFM service offering. This decision followed a careful assessment of the near- and longer-term prospects and alternatives. We believe this course of action allows us to fully focus on our services within Truckload, Intermodal and Logistics, is consistent with our portfolio management and capital allocation disciplines, and is in the long-term best interest of our company and our stakeholders," said Schneider's Chief Executive Officer Mark Rourke.

Financial results

The transportation and logistics services company reported total revenue of $1.213 billion, down 2 percent year-over-year. Revenue excluding fuel surcharge declined 1 percent to $1.089 billion. Adjusted operating income was down 14 percent to $83.8 million with an adjusted operating ratio (OR) of 92.3 percent, 110 basis points worse year-over-year.

"Compared to the second quarter of 2018, operating earnings were negatively impacted by FTFM, and by muted seasonality in 2019, which affected all operations. As we look to the second half of the year, we expect industry capacity levels to rationalize given the challenges of the current operating environment. Our focus will be to improve our asset utilization and our overall cost position across our Truckload and Intermodal platforms," said Rourke.

TL revenue excluding fuel surcharge declined 6 percent to $534.9 million as revenue per truck per week declined 7 percent to $3,609. The company said that pricing was "modestly positive" year-over-year, but was more than offset by lower productivity due to lower seasonality in volumes, the onboarding of new dedicated accounts and a net increase in average tractors, up 110 units. OR for the division was 98.5 percent, 930 basis points worse year-over-year, which includes the FTFM goodwill impairment. Excluding the FTFM impacts, the division saw an 88.4 percent OR, 130 basis points worse than the year ago period.

SNDR Key Performance Indicators – TL

Intermodal revenue excluding fuel surcharge improved 12 percent year-over-year to $259.8 million as orders were up 2 percent and revenue per order increased 11 percent. However, operating income declined 6 percent to $30.5 million due to higher purchased transportation costs and lower utilization.

Logistics revenue excluding fuel surcharge declined 9 percent to $227 million as brokerage volumes increased 15 percent, but was more than offset by lower revenue per order. Operating income declined 12 percent to $9.2 million. Management cited customer insourcing in the import/export business and declines in brokerage net revenue as the reasons for the decline. Brokerage revenue accounted for 87.5 percent of the division's total revenue.

Lowered guidance

SNDR also lowered its full year 2019 adjusted EPS guidance to $1.30 to $1.38 from $1.50 to $1.60. The new range is below the current consensus estimate of $1.43. Management cited a "less favorable" pricing and demand environment in all segments for the remainder of the year as the reason.

The company will host a call at 10:30 AM ET to discuss these results.

SNDR stock price – SONAR

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