Schneider Reports Revenue Growth, Profit Dip in Tough Market
CEO Rourke Sees English-Language Proficiency, Non-Domicile CDL Enforcement and Carrier Bankruptcies Driving Market Rationalization
Key Takeaways:
- Schneider reported third-quarter net income of $19.4 million, down from $30.6 million a year earlier, despite a 10.4% revenue increase to $1.45 billion.
- The company cited $16 million in unexpected claims costs and softer freight market conditions in August and September as key factors weighing on earnings.
- CEO Mark Rourke said he expects claims costs to normalize in the fourth quarter and noted that industry supply reductions could support future market recovery.
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Schneider experienced revenue growth in the third quarter from the previous year even as a slowing market and claims costs dragged down earnings, the company reported Oct. 30.
The Green Bay, Wis.-based truckload motor carrier posted net income of $19.4 million, or 11 cents a diluted share, for the three months ending Sept. 30. That compared with $30.6 million, 17 cents, during the same time the previous year. Total operating revenue increased by 10.4% to $1.45 billion from $1.32 billion.
“One item I like to address before I turn to the broader market is claims-related costs,” Schneider CEO Mark Rourke said during a call with investors. “During the third quarter, we recorded roughly $16 million more in these costs than we had previously expected.”
Rourke added that these costs were driven primarily by unfavorable developments on three claims from the 2021 and 2023 policy years. But he also doesn’t expect those costs to repeat in the fourth quarter.
“When we updated our expectations for the second half during our last earnings call, we experienced a solid uptick in market conditions in the back half of July that gave us some cause for optimism,” Rourke said. “However, that strength faded as the quarter progressed, with August and September market trends largely sub-seasonal. This was evident through pockets of softer volumes with existing customers, retreating spot rates [and] modest peak activity to date.”
Rourke highlighted September in particular as softer than what typical patterns would have suggested. He also noted that these market conditions are likely to persist into the balance of the year. But even so, he is continuing to see traction with several key initiatives that the company is pursuing to improve operations, as well as other developments.
“Though this down cycle has been extended, several new dynamics have been introduced over the last few months that are definitive catalysts, with removal of excess capacity after several years of expecting, but not seeing, more significant supply rationalization,” Rourke said. “This includes dynamics such as English-language proficiency enforcement and the impact of non-domicile CDL renewals.”
Rourke added that these developments also reflect companies self-regulating due to the threat of enforcement. He also has seen an increase in carrier bankruptcies as the industry approaches concluding a year of Class 8 production below replacement levels. He noted that trend may accelerate given how the tariff dynamics have been unfolding.
“Collectively, we believe these have the potential to drive more supply rationalization than the impact we saw in 2017 from requiring electronic logging devices for hours-of-service enforcement,” Rourke said. “Against this backdrop, we continue to press on our efforts to drive structural improvements in our business — especially in three main areas.”
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Rourke first pointed to Schneider’s revenue strategy to further lean into areas of differentiation. The second area is the company’s focus on productivity in ways that drive asset efficiency and lower costs to serve. The third area is in structural improvement and capital discipline by working to do more with less.
“[This] leaves us well positioned for strategic investment and the ability to act opportunistically on ways to add shareholder value,” Rourke said. “In doing so, we are creating growth opportunities that has the added benefit of enabling us to stay more broadly disciplined.”
Segment Breakdown
Truckload revenue increased 17% to $624.5 million from $532.2 million. This was driven by a rise in dedicated volume that was primarily due to the acquisition of Cowan Systems. Revenue per truck per week slipped 1% to $3,923 primarily because of a decrease in productivity and friction from new dedicated business startups. Income from operations decreased 16% to $19.8 million from $23.7 million.
Intermodal revenue increased 6% to $281.4 million from $264.7 million. This was largely related to volume growth that was partially offset by a decrease in revenue per order due to shorter length of hauls. Income from operations increased 7% to $16.8 million from $15.7 million. This was primarily due to the same volume growth, but that was partially offset by a decrease in length of haul and an increase in insurance-related costs.
Logistics revenue increased 6% to $332.1 million from $313.7 million. This was primarily due to the acquisition of Cowan being partially offset by lower brokerage volume. Income from operations decreased 16% to $6.4 million from $7.6 million. This was driven by lower brokerage volume that was partially offset by the impacts of Cowan revenue and growth in power-only net revenue per order.
Schneider ranks No. 10 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 7 on the truckload sector list. It also ranks No. 18 on the TT Top 100 list of the largest logistics companies. It also ranks No. 47 on the TT Top 50 global freight companies list.
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