WERN Q1 Earnings Call: Misses Expectations as Costs, Weather, and Tariff Uncertainty Weigh on Results

Freight delivery company Werner (NASDAQ: WERN) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 7.4% year on year to $712.1 million. Its non-GAAP loss of $0.12 per share was significantly below analysts’ consensus estimates.

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StockStory’s Take

Werner’s first quarter results were shaped by several headwinds that management acknowledged on the earnings call, including elevated insurance costs, challenging weather conditions, and increased technology spending. CEO Derek Leathers described how a significant legal verdict, higher claims expenses, and disruptive operating conditions led to earnings that fell short of expectations. Leathers stated, “Our first quarter results did not meet our expectations. We faced several challenges during the quarter, some industry-wide, some specific to Werner, but we were acting decisively to address them.”

Looking ahead, Werner’s leadership highlighted a focus on cost control, technology transformation, and growth in its Dedicated fleet business as key elements in their strategy to weather ongoing volatility. Leathers expressed cautious optimism about long-term prospects, citing strong Dedicated contract wins and ongoing investments in operational efficiency. CFO Chris Wikoff noted that while near-term conditions remain uncertain, the company is increasing its 2025 cost savings target and expects to see margin improvement as demand stabilizes and technology initiatives deliver greater efficiency.

Key Insights from Management’s Remarks

Werner’s management addressed both industry-wide and company-specific challenges impacting Q1 results, while outlining actions taken to improve future performance and ensure long-term competitiveness.

• Insurance and Legal Costs: Elevated claims expenses, including a large legal verdict tied to a 2019 incident, weighed heavily on quarterly earnings. Management emphasized that adverse “nuclear verdicts”—large jury awards against trucking companies—remain a persistent industry headwind and called for tort reform to address this issue.
• Extreme Weather Disruptions: Severe winter weather, particularly in Werner’s key operating regions, negatively affected fleet utilization and contributed to lower miles per truck. These disruptions led to reduced operating efficiency and additional costs.
• Technology Transformation Investments: Werner continued its transition to the EDGE TMS (Transportation Management System) platform, which management believes will enhance efficiency and unlock future cost savings. While logistics operations are fully converted, the One-Way and Dedicated segments are still in transition, delaying the realization of expected productivity gains.
• Strength in Dedicated Fleet Business: Despite market headwinds, Werner secured several large Dedicated fleet contracts, representing over 200 trucks scheduled to be implemented later in the year. Management views its expertise in Dedicated services—and recent wins in new customer verticals—as a long-term advantage.
• Cost Containment and Restructuring: Werner increased its 2025 cost savings goal from $25 million to $40 million and is implementing more aggressive restructuring efforts. These include optimizing headcount, procurement, and facilities while maintaining investments in growth and technology.

Drivers of Future Performance

Management’s outlook for the remainder of the year centers on cost containment, technology-driven productivity improvements, and growth in Dedicated fleet services, while navigating ongoing tariff and insurance headwinds.

• Dedicated Fleet Expansion: The pipeline for Dedicated contracts remains strong, with new wins expected to drive truck count growth and provide margin stability as these contracts are implemented in late Q2 and early Q3.
• Technology Synergies Realization: Full implementation of the EDGE TMS platform is anticipated to yield greater operational efficiencies and cost reductions, with the most significant benefits projected to materialize in the second half of the year.
• Tariff and Regulatory Risks: Management highlighted continued uncertainty related to tariffs on equipment and cross-border freight, as well as elevated insurance costs. Both factors could affect capital spending decisions and margin recovery in the near term.

Top Analyst Questions

• Jason Seidl (TD Cowen): Asked about Dedicated margins versus One-Way Truckload and the long-term impact of recent Dedicated contract wins. Management noted Dedicated margins continue to outperform, especially as One-Way remains under pressure.
• Ari Rosa (Citigroup): Questioned whether insurance costs could normalize without legislative change. Management responded that while operational safety improvements help, only broader tort reform will address the risk of outsized legal verdicts.
• Scott Group (Wolfe Research): Inquired about the effect of declining imports and margin prospects for Q2. Management said West Coast import exposure is about 10% and expects margin improvement as cost actions take hold, though uncertainty remains.
• Bascome Majors (Susquehanna): Asked about pricing dynamics with retail customers amid tariff uncertainty and how bid season is evolving. Management reported stable volumes and retention but noted that contract pricing is mixed and closely tied to ongoing volatility.
• Daniel Imbro (Stephens): Sought details on the EDGE technology rollout and expected financial benefits. Management indicated logistics is seeing productivity gains, with broader benefits expected late in the year as full implementation is achieved.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be monitoring (1) the pace and impact of Dedicated fleet contract implementations and whether they translate to improved profitability, (2) the realization of cost savings and productivity gains from the EDGE TMS technology platform rollout, and (3) developments in tariff policy and insurance litigation that could influence Werner’s cost structure and capital allocation. Continued progress in these areas will be key to tracking Werner’s recovery and execution of its strategic initiatives.

Werner currently trades at a forward P/E ratio of 23.3×. Should you double down or take your chips? The answer lies in our free research report.

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