Transportation company Schneider (NYSE:SNDR) fell short of the market’s revenue expectations in Q4 CY2024, with sales falling 2.4% year on year to $1.34 billion. Its non-GAAP profit of $0.20 per share was in line with analysts’ consensus estimates.

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“In the second quarter of 2024, signs of seasonality returned to the freight market and were even more evident in the fourth quarter. The year ended positively as carriers continued to exit the market and demand aligned more closely to seasonal expectations,” said Mark Rourke, President and Chief Executive Officer of Schneider.

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.

Ground Transportation

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.

Sales Growth

A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Schneider National’s 2.2% annualized revenue growth over the last five years was sluggish. This fell short of our benchmarks and is a tough 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. Schneider National’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 10.5% annually. Schneider National 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 better understand the company’s revenue dynamics by analyzing its most important segments, Truckload and Logistics, which are 41.8% and 24.2% of revenue. Over the last two years, Schneider National’s Truckload revenue (road freight) averaged 1.4% year-on-year declines while its Logistics revenue (supply chain, warehousing) averaged 18.1% declines.

This quarter, Schneider National missed Wall Street’s estimates and reported a rather uninspiring 2.4% year-on-year revenue decline, generating $1.34 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 12.4% over the next 12 months, an improvement versus the last two years. This projection is healthy and implies its newer products and services will catalyze better top-line performance.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Schneider National was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.8% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, Schneider National’s operating margin decreased by 3.2 percentage points over the last five years. The company’s performance was poor no matter how you look at it. It shows operating expenses were rising and it couldn’t pass those costs onto its customers.

In Q4, Schneider National generated an operating profit margin of 3.2%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Schneider National, its EPS declined by 10.9% annually over the last five years while its revenue grew by 2.2%. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of Schneider National’s earnings can give us a better understanding of its performance. As we mentioned earlier, Schneider National’s operating margin was flat this quarter but declined by 3.2 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 National, its two-year annual EPS declines of 48.6% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q4, Schneider National reported EPS at $0.20, up from $0.16 in the same quarter last year. This print beat analysts’ estimates by 1.5%. Over the next 12 months, Wall Street expects Schneider National’s full-year EPS of $0.70 to grow 63.3%.

Key Takeaways from Schneider National’s Q4 Results

We struggled to find many resounding positives in these results. Its full-year EPS guidance missed significantly and its revenue fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $29.78 immediately after reporting.

Big picture, is Schneider National a buy here and now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.