Shares of multimodal transportation provider Schneider National were off 8% in midday trading on Thursday following a worse-than-expected earnings report. Continued demand weakness and higher insurance costs tanked its third quarter, causing the company to materially lower its full-year outlook.
Schneider (NYSE: SNDR) reported third-quarter adjusted earnings per share of 12 cents, 8 cents light of the consensus estimate and 6 cents lower year over year. The adjusted EPS number included a 7-cent headwind ($16 million) from higher insurance claims costs. (The result excluded 1 cent per share in severance and acquisition-related amortization expenses.)
The company lowered its full-year 2025 adjusted EPS guidance to “approximately 70 cents,” from a range of 75 cents to 95 cents. The new guide would have been 77 cents without the insurance hit in the quarter, closer to the 80-cent consensus estimate at the time of the print.
Schneider’s key performance indicators
Freight demand is still subseasonal in October but not as weak as it was in September, management said on a Thursday call with analysts. July benefitted from a demand pull forward ahead of tariffs, with both August and September coming in below normal seasonal trends.
(Schneider generated adjusted EPS of 69 cents last year. Schneider’s initial 2025 outlook contemplated EPS of 90 cents to $1.20).
Consolidated revenue of $1.45 billion was 10% higher y/y and slightly ahead of the $1.43 billion consensus estimate. The y/y revenue increase was driven by the acquisition of Cowan Systems in December.
Tough quarter won’t be remembered if capacity shakeout occurs
Weak truckload demand weighed on metrics in the quarter, but management said it is already seeing the impacts from heightened regulatory enforcement (non-domiciled CDL restrictions and English language proficiency enforcement). It also flagged weak Class 8 truck orders as a catalyst for a tightening TL market.
It said shippers are becoming more selective in carrier vetting and capacity selection as enforcement ramps. Schneider has doubled its spot market exposure from 5% to 6% historically, partly on the expectation that spot rates step higher as more drivers are sidelined, and also due to its inability to lockdown desired contract rates.
Management estimates the 2017 electronic logging device mandate removed 3% to 4% of capacity from the industry. It sees the latest round of regulations taking out more than that.
SONAR: Outbound Tender Reject Index for 2025 (blue shaded area), 2024 (green line) and 2023 (pink line). A proxy for truck capacity, the Outbound Tender Reject Index shows the number of loads being rejected by carriers. Current tender rejections are higher than prior-year levels but still not signaling a recovery. To learn more about SONAR, click here.
Q4 highlights by division
Schneider’s TL unit recorded revenue of $625 million, a 17% y/y increase. The dedicated fleet saw a 26% y/y revenue increase as truck count was up 28% (due to the Cowan acquisition). That was partially offset by a 2% decline in revenue per truck per week. Network, or one-way, revenue was up 1% on modest fleet growth and flat revenue per truck per week.
Network bid season yielded low- to mid-single-digit contractual rate increases, but not the level needed to offset cost inflation, hence the move to the spot market. The company lowered its 2025 capex budget to $300 (from $325 million to $375 million) as it cut tractor spending for the rest of the year. The decision supports its equipment utilization efforts and will boost free cash flow.
The TL unit reported a 96.8% adjusted operating ratio (inverse of operating margin), which was 130 basis points worse y/y and 320 bps worse sequentially. The majority of the excess insurance costs during the quarter were incurred by this segment, though the exact amount was not specified.
The company remains focused on fleet utilization initiatives and said it will look to add to the $40 million in cost savings previously outlined. Non-driver employee count is down 6% from the beginning of the year and the company is planning further headcount reductions.
Intermodal revenue increased 6% y/y as loads were up 10% and revenue per load fell 2%. Management touted market share gains, noting volume strength on its North-South Mexico corridor. The operating ratio improved 10 bps y/y to 94%.
Logistics revenue increased 6% y/y but the margin slid 50 bps (98.1% OR).
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