Werner Enterprises is on track to return its truckload business to double-digit operating margins, but rising costs will probably push back that target. The US transport group, reporting a third quarter in line with its previous profit warning, said cost pressures would continue to weigh on earnings through the end of the year and into the first quarter.
The carrier (NASDAQ: WERN) posted its quarterly earnings results on Tuesday after the market closes. The results were in line with the company’s earlier guidance which had forecast earnings per share of 15 cents to 16 cents, well below the then-consensus estimate of 36 cents.
But revenue was stronger. Consolidated revenue was $951 million, up 23 percent year over year and at the high end of the company’s revised guidance range of $946 million to $951 million. The increase was largely due to increased fuel surcharges and the acquisition of dedicated carrier FirstFleet in January.
Higher costs offsetting gains in operating performance
Higher diesel prices, higher costs to recruit drivers and an adjustment to a reserve for prior claims all weighed on Werner’s third-quarter earnings. These combined factors decreased adjusted EPS by 18 cents sequentially.
The company offset some of the impact with asset sales. The gains on those trades increased to $8 million in the year-ago quarter from $4.5 million, adding four cents to earnings per share. Adjusted net loss of $0.03 per share for the third quarter of 2025 compared with adjusted net loss of $0.03 per share a year ago.
Other costs were incurred in some cases before the related revenue was generated. For example, they needed to spend money to hire and train drivers in advance, as they ramped up capacity to match growing demand from customers.
Werner had to bear the cost of adding 130 dedicated trucks and drivers during the quarter, but the related revenue stream only began to flow in during the last few weeks of the quarter.
“We’ve moved up our hiring and onboarding in a proactive way to be ready for the tighter industry capacity and stronger demand,” said CEO and Chairman Derek Leathers.
“With industry capacity tightening, we made a conscious decision to accelerate investments in driver recruiting and onboarding to capture increasing customer demand and support fleet expansion,” said Leathers. “We continue to be confident in our way forward and our ability to capitalize on the early days of this freight upcycle.”
However, management did acknowledge that some of the financial headwinds will continue into the first quarter.
Fourth-quarter earnings outlook remains cautious
Werner expects only a modest sequential improvement in adjusted earnings per share during the fourth quarter, compared with the 16 cents reported in the third quarter. That outlook suggests earnings could fall materially short of the current consensus estimate of 38 cents per share.
Management estimates that approximately one-third of the 18-cent earnings impact in the third quarter came from driver recruitment and sign-on bonuses. These costs, the company stressed, do not reflect “structural labor inflation.”
The remaining 12 cents were attributable to fuel expenses and insurance claims, which are expected to ease substantially in the fourth quarter.
Other factors will continue to constrain the recovery, however. Werner anticipates lower gains from asset sales, with those gains expected to total just $1.7 million in the fourth quarter. Higher interest expenses and an increased tax rate will also weigh on earnings.
Improved pricing and a slightly larger fleet, intended to accommodate peak-season demand, should provide some relief.
| Werner Enterprises | Q3/26 | Q3/25 | Y/Y Gross Change | Y/Y % Change |
|---|---|---|---|---|
| Consolidated TL: | ||||
| Revenue | $714.0 | $519.8 | $194.2 | 37.4% |
| Revenue (ex fuel) | $579.6 | $452.0 | $127.6 | 28.2% |
| Adjusted OR % (ex. fuel) | 95.9% | 98.1% | -220 bps | -2.2% |
| One-Way TL: | ||||
| Revenue (ex fuel) | $135.8 | $159.5 | -$23.7 | -14.9% |
| Average Trucks | 1,673 | 2,638 | -965 | -36.6% |
| Miles/Truck/Week (y/y) | 22.4% | -4.7% | N/A | N/A |
| Deadhead % | 16.0% | 15.7% | 31 bps | 2.0% |
| Revenue/Total Mile (y/y ex-fuel) | 9.7% | 0.4% | N/A | N/A |
| Revenue/Truck/Week (ex-fuel) | $6,244 | $4,649 | $1,595 | 34.3% |
| Dedicated TL: | ||||
| Revenue (ex fuel) | $443.8 | $292.5 | $151.4 | 51.8% |
| Average Trucks | 6,995 | 4,865 | 2,130 | 43.8% |
| Revenue/Truck/Week (ex-fuel) | $4,881 | $4,624 | $257 | 5.6% |
| Logistics: | ||||
| Revenue | $215.8 | $232.6 | -$16.8 | -7.2% |
| Gross Margin % | 14.4% | 14.2% | 24 bps | 1.7% |
| Adjusted Operating Margin % | 0.4% | 1.8% | -140 bps | -77.8% |
| Consolidated: | ||||
| Revenue | $950.5 | $771.5 | $179.0 | 23.2% |
| Adjusted Operating Margin % | 2.2% | 1.4% | 80 bps | 57.1% |
| Adjusted EPS | $0.16 | -$0.03 | $0.19 | -633.3% |
Revenue in millions
TL revenue metrics exclude fuel surcharge revenue
Diesel price trends remain margin negative
Fuel costs are a major source of uncertainty for Werner. Truckload fuel surcharges typically follow diesel prices by one week, leaving carriers exposed if diesel prices rise faster than fuel surcharge revenue can keep pace.
Diesel prices rose sequentially in nine of the 13 weeks in the third quarter. Retail diesel prices fell 1% sequentially in July before rising 10% in August and another 15% in September.
The trend increased operating costs in the quarter and affected profitability. If diesel prices fall the effect could be reversed to turn the current headwind into a positive contributor to earnings as fuel costs ease.
Strong growth in dedicated trucking on the back of FirstFleet acquisition
The dedicated operations of Werner continued to grow and the segment represented 81% of the company’s total truck fleet. Ex-fuel surcharge revenue rose 52% year-over-year and the average truck count grew 44% to close to 7,000 units.
Revenue per truck per week, excluding fuel, also improved 6% versus the same period a year ago.
Werner significantly expanded its dedicated transportation network with the January acquisition of FirstFleet, which added more than 2,400 tractors and $615 million in annual revenue.
The company raised its full year 2026 outlook for dedicated revenue per truck per week after the segment’s performance. Growth is now expected to be 4% to 5% year-over-year, compared with the previous forecast of 3% to 5%.
One-way fleet efficiency improved post restructuring
The restructuring measures implemented earlier in the year on its one-way operations continued to benefit Werner. The changes included trimming unprofitable customer accounts and reallocating underutilized equipment to boost fleet efficiency.
“Even with less trucks in the business utilization improved significantly.
Average truck count was down 37% and one-way revenue excluding fuel surcharges was down 15% year over year. Revenue per truck, excluding fuel, was up 34% in the same period.
That improvement included a 22% increase in miles per truck and a 10% increase in revenue per total mile excluding fuel. But the average length of haul increased 116 miles, which affected revenue per mile. Longer shipments tend to generate lower rates per mile, which helps explain the difference between the two performance measures.
Higher contract rates for the next renewal cycle
Werner still expects revenue per total mile from its one-way fleet to be 10% to 13% higher in the fourth quarter compared with a year ago, it said.
The company is also gearing up for a round of contract renewals. Some 60% of its one-way revenue book comes up for renewal in the first half of 2027, and management is targeting double-digit rate increases on a lot of those contracts.
Although Werner did not disclose the exact margin level, the segment enjoyed more than 800 basis points of year-over-year margin improvement in the third quarter. After these gains the company is looking to expand its one-way fleet again.
Truckload revenue up, but margins pressured by higher sequential costs
Werner’s truckload (TL) segment had combined revenue of $714 million, up 37% year-over-year. Revenue increased 28% excluding fuel surcharges.
The segment had an adjusted operating ratio of 95.9% or an adjusted operating margin of 4.1%. The operating ratio improved 220 basis points from last year’s third quarter, but was worse than the prior quarter by 140 basis points.
Management largely blamed the sequential decline on rising expenses, estimating that cost headwinds were a 200-basis-point drag on performance.
The results demonstrate the challenges carriers have in converting stronger demand and higher pricing into immediate margin gains. Even with better revenues, fuel, labor and other operating expenses can take a big bite out of the increase.
Logistics division in the black again
Werner’s logistics business generated $216 million in revenue, down 7 percent from a year earlier. The division returned to profitability, posting an adjusted operating margin of 0.4% despite the decline.
The truckload brokerage in the logistics segment had a 600 basis point sequential improvement in operating margin. Werner does not isolate the margin of the brokerage operation.
The improvement reflects operational changes beginning to benefit financial performance, even as the company continues to work through a difficult cost environment.
Werner’s results are important to the freight business because
Werner’s third-quarter results underscore the pressures on trucking companies as the freight market starts to rebound. Higher diesel prices, driver recruitment costs and insurance related costs are limiting the benefits of stronger revenue and improving rates.
The carrier is investing ahead of demand, expanding its dedicated fleet and increasing the utilization of its one-way business. These steps could help it profit from tighter capacity and a stronger freight cycle, but near-term profitability is vulnerable to costs that have yet to fully normalize.
The company’s guidance doesn’t suggest a quick snap back to better margins, but rather a slow recovery. Despite Werner’s intention to pursue double-digit truckload margins, the conservative fourth-quarter guidance and anticipated cost pressures in the first quarter highlight the difficulties of the early stage of a freight upcycle.
