Werner (WERN)

Freight delivery company Werner (NASDAQ:WERN) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 3.5% year on year to $771.5 million. Its non-GAAP loss of $0.03 per share was significantly below analysts’ consensus estimates.

Company Overview

Conducting business in over a 100 countries, Werner (NASDAQ:WERN) offers full-truckload, less-than-truckload, and intermodal delivery services.

The growth of e-commerce and global trade continues to drive demand for shipping services, especially last-mile delivery, presenting opportunities for ground transportation companies. The industry continues to invest in data, analytics, and autonomous fleets to optimize efficiency and find the most cost-effective routes. Despite the essential services this industry provides, ground transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.

Competitors offering similar products include C.H. Robinson (NASDAQ:CHRW), FedEx (NYSE:FDX), and J.B. Hunt (NASDAQ:JBHT).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Werner’s sales grew at a tepid 4.7% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Werner’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 5.1% annually. Werner isn’t alone in its struggles as the Ground Transportation industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Truckload Transportation and Logistics, which are 67.4% and 30.1% of revenue. Over the last two years, Werner’s Truckload Transportation revenue (deliveries made with Werner's fleet) averaged 6.5% year-on-year declines while its Logistics revenue (brokered deliveries using third-party fleets) averaged 1.7% declines.

This quarter, Werner reported modest year-on-year revenue growth of 3.5% but beat Wall Street’s estimates by 1%.

Looking ahead, sell-side analysts expect revenue to grow 4.2% over the next 12 months. Although this projection implies its newer products and services will catalyze better top-line performance, it is still below average for the sector.

All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products and commands stronger pricing power.

Werner has bad unit economics for an industrials company, giving it less room to reinvest and develop new offerings. As you can see below, it averaged a 24.3% gross margin over the last five years. That means Werner paid its suppliers a lot of money ($75.72 for every $100 in revenue) to run its business.

This quarter, Werner’s gross profit margin was 48.4%, marking a 28.9 percentage point increase from 19.5% in the same quarter last year. Werner’s full-year margin has also been trending up over the past 12 months, increasing by 7 percentage points. If this move continues, it could suggest a less competitive environment where the company has better pricing power and leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Werner was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.6% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Looking at the trend in its profitability, Werner’s operating margin decreased by 9.2 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. We’ve noticed many Ground Transportation companies also saw their margins fall (along with revenue, as mentioned above) because the cycle turned in the wrong direction, but Werner’s performance was poor no matter how you look at it. It shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Werner generated an operating margin profit margin of negative 1.7%, down 4 percentage points year on year. Conversely, its revenue and gross margin actually rose, so we can assume it was less efficient because its operating expenses like marketing, R&D, and administrative overhead grew faster than its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Werner, its EPS declined by 55.8% annually over the last five years while its revenue grew by 4.7%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

Diving into the nuances of Werner’s earnings can give us a better understanding of its performance. As we mentioned earlier, Werner’s operating margin declined by 9.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Werner, its two-year annual EPS declines of 87.4% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q3, Werner reported adjusted EPS of negative $0.03, down from $0.15 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Werner’s full-year EPS of $0.04 to grow 2,143%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Werner has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.6%, subpar for an industrials business.

Werner’s free cash flow clocked in at $79.38 million in Q3, equivalent to a 10.3% margin. Its cash flow turned positive after being negative in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Werner historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8.9%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Werner’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Werner reported $50.98 million of cash and $725 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $291.3 million of EBITDA over the last 12 months, we view Werner’s 2.3× net-debt-to-EBITDA ratio as safe. We also see its $16.87 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its adjusted operating income missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 1.1% to $25.10 immediately after reporting.

Updated: December 3, 2025 at 10:40 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Werner.

Werner falls short of our quality standards. For starters, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its declining EPS over the last five years makes it a less attractive asset to the public markets.

Werner’s P/E ratio based on the next 12 months is 44.2x. This valuation tells us a lot of optimism is priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $25.87 on the company (compared to the current share price of $28.79), implying they don’t see much short-term potential in Werner.