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Dive Summary:
- Werner Enterprises is receptive to expanding operations to 70 percent of its combined trucking portfolio in the near term, CEO and President Derek Leathers said Tuesday. 4th quarter earnings call.
- The Nebraska-based company’s average number of dedicated TL trucks was 5,239 in the 4th quarter, while the number of one-way commercial trucks fell to 2,929, according to earnings presentation. Werner has traditionally sought to maintain its dedicated and one-way operations at a 65-35 mix in the truck segment.
- While singletrack will still present opportunities, the company is looking to shift what it can “to this more stable, resilient, committed business that has proven resilient in both good and bad markets,” Leathers said.
Dive Insight:
Werner is fine with shrinking his fleet size if necessary and notes the ability to scale his fleet specialists.
The carrier expects a total of 8,000 trucks in its Trucking Services segment, the bulk of its business, to be flat or down as much as 3% this year. In 2023, that number of trucks fell by 7% as customers reduced operations.
Despite the recession, Werner has seen remarkable fleet retention and added new customers, but loyal customers have reduced the number of trucks based on volume needs, primarily because of inventory levels and a lack of replenishment, Leathers said.
“There is definite pressure, especially on the one-way side of the network,” he said. “But our position is that we must remain disciplined. If you look at this earnings season in particular, it’s glaringly obvious that carriers can’t make a reinvestable return at current interest rates.”
A number of one-way customers in particular are still looking to get better prices, and Werner expects continued price pressure during the first part of the 2024 bidding season before moderation occurs later in the year, Leathers said.
The one-way business simply isn’t worth expanding until there’s more tilt, and it’s the driving factor hurting Trucking Services’ long-term bottom line, Leathers said.
Although the challenging environment has focused on single-line, dedicated has also seen some margin and inflationary pressure and the carrier could have some further turnaround in the first half of the year, according to the company.
However, there is considerable upside potential in the specialist.
“We already have a very robust pipeline of exclusives and we’re pricing a lot of opportunities as we speak,” Leathers said. “Without that is we think it will be flat to maybe slightly up through the end of the first half with built-in growth in the back half.”