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Here's Why Investors Should Give WERN Stock a Miss Now

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Werner Enterprises’ (WERN - Free Report) top line is grappling with a freight market downturn, hurting the company’s prospects. Elevated operating expenses are challenging the company’s financial stability. Escalated labor and fuel costs are hurting WERN’s bottom line, making it an unattractive choice for investors’ portfolios.

Let’s delve deeper.

WERN: Risks to Watch

Southward Earnings Estimate Revision:The Zacks Consensus Estimate for current-quarter earnings has been revised 33.3% downward in the past 60 days. For the current year, the consensus mark for earnings has moved 26% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.

Weak Zacks Rank: Werner Enterprises currently carries a Zacks Rank #5 (Strong Sell).

Unimpressive Price Performance: WERN shares have declined 7% in the past year against the industry’s 0.2% rise.

Zacks Investment Research
Image Source: Zacks Investment Research

Bearish Industry Rank: The industry to which Werner Enterprises belongs currently has a Zacks Industry Rank of 222 (out of 251). Such an unfavorable rank places it in the bottom 11% of Zacks Industries.Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.

A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Reckoning the industry’s performance becomes imperative.

High Costs:  High operating expenses are hurting WERN’sbottom line, challenging its financial stability. The surge in operating expenses was caused by increased labor and fuel costs. In the second quarter of 2024, labor costs, comprising salaries and benefits, accounting for 35.1% of the total operating expenses, amounted to $741.2 million. Fuel costs totaled $72 million.

The freight market downturn does not bode well for the company’s prospects. As a result, the top line fell by 6% year over year.

The persistent driver crisis in the trucking industry is worsening supply-chain challenges across the United States. Driver scarcity issues limit trucking capacity, making it difficult for trucking companies like WERN. American Trucking Associations’ chief economist, Bob Costello, expects the trucking industry to be short of more than 160,000 drivers by 2030.

Stocks to Consider

Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide (CHRW - Free Report) and Westinghouse Air Brake Technologies (WAB - Free Report) .

C.H. Robinson Worldwide currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  CHRW has an expected earnings growth rate of 25.2% for the current year.

The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 7.3%. Shares of CHRW have risen 14.2% in the past year.

WAB carries a Zacks Rank #2 (Buy) at present and has an expected earnings growth rate of 26% for the current year.

The company has a discouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters. The average beat is 11.8%. Shares of WAB have climbed 61% in the past year.


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