Schneider (SNDR)

Transportation company Schneider (NYSE:SNDR) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 6.3% year on year to $1.40 billion. Its non-GAAP profit of $0.16 per share was 15.3% above analysts’ consensus estimates.

Company Overview

Employing thousands of drivers across the country to make deliveries, Schneider (NYSE:SNDR) makes full truckload and intermodal deliveries regionally and across borders.

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).

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Schneider’s 2.8% annualized revenue growth over the last five years was sluggish. This fell short of our benchmarks and is a rough starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Schneider’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 8.5% annually. Schneider 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 and Logistics, which are 43.8% and 23.7% of revenue. Over the last two years, Schneider’s Truckload revenue (road freight) was flat while its Logistics revenue (supply chain, warehousing) averaged 14.1% year-on-year declines.

This quarter, Schneider grew its revenue by 6.3% year on year, and its $1.40 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 9.6% over the next 12 months, an improvement versus the last two years. This projection is commendable and suggests its newer products and services will catalyze better top-line performance.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Schneider has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 18.4% gross margin over the last five years. That means Schneider paid its suppliers a lot of money ($81.60 for every $100 in revenue) to run its business.

This quarter, Schneider’s gross profit margin was 28.9%, up 14.2 percentage points year on year. Schneider’s full-year margin has also been trending up over the past 12 months, increasing by 3.7 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Schneider was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.7% 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, Schneider’s operating margin decreased by 3.3 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. Schneider’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.

In Q1, Schneider generated an operating profit margin of 3%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

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 Schneider, its EPS declined by 10.3% annually over the last five years while its revenue grew by 2.8%. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of Schneider’s earnings can give us a better understanding of its performance. As we mentioned earlier, Schneider’s operating margin was flat this quarter but declined by 3.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses 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 Schneider, its two-year annual EPS declines of 46.7% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q1, Schneider reported EPS at $0.16, up from $0.11 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Schneider’s full-year EPS of $0.74 to grow 32.4%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Schneider 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 4.8%, subpar for an industrials business.

Taking a step back, we can see that Schneider’s margin dropped by 1.6 percentage points during that time. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level. Almost any movement in the wrong direction is undesirable because of its relatively low cash conversion. If the longer-term trend returns, it could signal it’s in the middle of an investment cycle.

Schneider broke even from a free cash flow perspective in Q1. This cash profitability was in line with the comparable period last year but below its five-year average. In a silo, this isn’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

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).

Although Schneider hasn’t been the highest-quality company lately because of its poor revenue and EPS performance, it historically found a few growth initiatives that worked. Its five-year average ROIC was 12%, higher than most industrials businesses.

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, Schneider’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Schneider reported $106.2 million of cash and $576.7 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 $607.3 million of EBITDA over the last 12 months, we view Schneider’s 0.8× net-debt-to-EBITDA ratio as safe. We also see its $2.9 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 enjoyed seeing Schneider beat analysts’ EPS expectations this quarter despite in line revenue. On the other hand, its full-year EPS guidance was lowered and missed. Overall, this print could have been better. The stock remained flat at $21.52 immediately following the results.

Updated: July 9, 2025 at 11:17 PM EDT

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 Schneider.

Schneider doesn’t pass our quality test. To begin with, its revenue growth was weak over the last five years. 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.

Schneider’s P/E ratio based on the next 12 months is 26.6x. 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 $26.51 on the company (compared to the current share price of $26.08).