What will keep
Werner moving? Company could ponder merger as trucking industry consolidates

Werner Enterprises currently has about 7,000 trucks — well behind the 23,000 of newly formed Knight-Swift Transportation.

Some trucking companies are deciding bigger is better when it comes to fighting moribund shipping demand, low freight rates and excess truck capacity.

Now some industry analysts are looking to whether Omaha-based Werner Enterprises will join the consolidation race.

Werner is scheduled to report first-quarter earnings Thursday that are forecast at 20 cents per share, sharply down from the 28 cents a share it earned a year earlier.

The company also faces tougher competition after two of the biggest truckers — Phoenix-based Swift Transportation and Knight Transportation — combined to form a trucking colossus with $5 billion in annual revenue, 23,000 trucks and 28,000 employees.

Meantime, U.S. business conditions are mixed, with some indexes of economic growth showing slight improvement, others not. For one, consumer spending is not considered to have rebounded enough to generate big-money shipping demand from manufacturers and retailers. Another headwind facing truckers: More and more goods are on shorter hauls, such as from an online retailer’s warehouse straight to the customer’s house or office.

All that is leaving big truckers such as Werner, which has about 7,000 trucks, to ponder the wisdom of lining up merger partners of their own in a bid to compete with the massive economies of scale now available to the combined Knight-Swift firm.

“The big guys are wanting to get bigger,” said Jason Seidl, a transportation industry analyst with Cowen and Co. in New York. “Companies like Werner might start looking at what is available out there. Mergers are a possibility anytime you have two willing dance partners.”

Problem is, the music for almost two years has been a slow waltz. Only in October did the Cass Freight Index, a widely trusted industry benchmark, break a 20-month losing streak. The most recent report, for February, showed an increase of 1.9 percent from a year earlier and 7 percent from a month earlier. An alternate measure, the American Trucking Association’s For-Hire Truck Tonnage Index, fell 1 percent in March following a 0.1 percent decline during February.

As for what lies ahead for Werner, the employer of about 600 metro-area headquarters workers isn’t saying much. Chief Executive Derek Leathers acknowledged in a statement to The World-Herald after the Knight-Swift deal that the combination will likely come with “challenges and complexities” over the coming months and years.

“We continue to be laser-focused on our business strategy to return Werner to growth, increase our profitability, provide best in class service to our customers and create value for our shareholders and associates alike,” Leathers went on to say.

As for the company’s revenue, a proxy for volume and rates, analysts this month at Credit Suisse wrote in a research note that they expect a 3 percent increase in 2017, from a drop of 4 percent last year.

“Freight markets have weakened on slack demand and pricing has weakened as well, and we expect this environment to persist through 2017,” Credit Suisse said, while also noting Werner’s debt-free balance sheet. “Werner is likely to remain focused on growing its specialized and logistics services, and tractor count in its truckload operations will be relatively flat.”

Shares of Werner have fallen about 13 percent in the past year.

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