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Schneider’s 2023 outlook better than expected

Transportation and logistics provider Schneider National provided better-than-expected earnings guidance Thursday before the market opened, sending its shares higher. The company said it expects steady improvement in freight markets as the year progresses.

Schneider (NYSE: SNDR) reported adjusted earnings per share of 64 cents for the fourth quarter, which was 4 cents ahead of Seeking Alpha’s consensus estimate but 12 cents lower year over year (y/y). A lower tax rate associated with a change in state income taxes provided a 3-cent-per-share tailwind. The number also excluded a $5 million loss from the sale of a logistics unit in China, which accounted for 2 cents per share.

Adjusted EPS guidance of $2.15 to $2.35 was issued for 2023, compared to the consensus estimate of $2.15 at the time of the 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 reiterated long-term operating margin targets for the truckload segment (12% to 16%) and the intermodal business (10% to 14%). The margin outlook for the logistics segment was raised by 100 basis points on both ends of the new range (5% to 7%) as the company continues to add trailers to support a growing power-only brokerage business.

Table: Schneider’s key performance indicators

Revenue excluding fuel surcharges in the company’s TL segment increased 4% y/y to $545 million. Average trucks in service grew 14% to more than 10,500, but revenue per truck per week fell 8% y/y.

The truck count in the dedicated segment was 33% higher y/y given a prior acquisition as well as organic fleet growth. Dedicated revenue per truck per week was down 2% y/y. The company’s one-way TL segment, which has exposure to the spot market, recorded an 11% decline in revenue per truck per week on a tractor count that was 4% lower y/y.

The TL segment posted an 87.4% operating ratio, 410 bps worse y/y as higher driver and equipment costs were met by declining per-truck yields. Management said rate renewals in the dedicated segment should produce higher rates in 2023 given cost pressures in the network.

Intermodal revenue was down 1% y/y to $316 million as loads declined 6% and revenue per load increased 8%. Container turns fell 15% y/y to 3.8x in the quarter.

Some of the utilization headwind was tied to the company’s transition to Union Pacific’s (NYSE: UNP) rail line, which was completed during the quarter. Schneider will not be adding new containers in 2023 as it expects better rail service to result in better box turns. The goal is to get back to more than five loads per container per quarter, a level it has operated at in the past. Schneider plans to double its intermodal franchise by 2030 and said the partnership with Union Pacific provides it with more lane options and departure times.

The segment reported an 83.3% OR, 50 bps worse y/y but 740 bps better than the third quarter.

Revenue in the logistics segment fell 22% y/y to $425 million as brokerage volumes fell 5% with lower revenue per load accounting for the rest of the decline. A 94.3% OR was 110 bps worse than the year-ago quarter.

Consolidated revenue of $1.56 billion was flat y/y, down 7% excluding fuel surcharges. The company posted an 89% adjusted OR, which was 130 bps worse y/y. Purchased transportation as a percentage of revenue was down 650 bps, but all other expense lines moved higher.

Schneider generated $856 million in cash flow from operations, a 51% y/y increase. The company announced it has raised the dividend by a penny to 9 cents per share and approved a $150 million share repurchase program to offset dilution from incentive-based equity grants. Net capital expenditures for 2023 were guided to $550 million at the midpoint of the range.

Shares of SNDR were up 11.4% at 1:56 p.m. Thursday compared to the S&P 500, which was up 1.7%.

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