Werner Enterprises (NASDAQ:WERN) executives said recent truckload market indicators point to tightening conditions that have persisted beyond weather-related disruptions, while also outlining how the company expects its dedicated-focused portfolio and technology investments to support performance as pricing improves.
Spot market strength seen as supply-driven, with enforcement a key factor
Chairman and CEO Derek Leathers said spot rates have remained elevated since mid-December and continued to hold up more than three weeks after Storm Finn. He cited rejection rates hovering around the mid-teens in the weeks after the storm as another sign of tightness, noting that even a reduction of a few percentage points would still leave rejection rates “extremely elevated” for February, typically the lowest-volume month of the year.
On non-domiciled CDLs, Leathers said attrition is likely to be “front-end loaded,” because many of the largest cohorts of issuances occurred in late 2021 and 2022 and will expire earlier than some observers assume. He added that only a small portion of affected drivers may be able to renew documentation, and that some drivers who obtained CDLs legally are voluntarily leaving the market given the current environment.
FirstFleet acquisition: dedicated scale, customer tenure, and identified synergies
Leathers and Senior Vice President of Pricing and Strategic Planning Chris Neal discussed the recently completed FirstFleet acquisition, highlighting its “pure play dedicated” profile as a central attraction. Leathers said dedicated fleets are typically harder to displace—especially when the market is tightening—and described the timing as favorable because shippers are often focused on managing one-way needs and pricing rather than switching dedicated providers.
Leathers also emphasized customer longevity at FirstFleet, noting that three of its top four customers have been with the company for more than 25 years and that the average tenure of its top 10 customers exceeds 17 years. He said customer reaction has been positive, in part because FirstFleet’s dedicated management and drivers are staying in place while Werner can offer additional services such as intermodal, brokerage, and surge capacity during peak periods.
Neal said the deal is “accretive immediately,” before synergies. He cited approximately $18 million of cost synergies identified during diligence, which management expects to execute over roughly 18 months.
Dedicated business: margin improvement potential in a tighter market
Leathers said that after the acquisition and the company’s one-way restructuring, dedicated will represent closer to 70% of the portfolio. He pushed back on the idea that dedicated becomes an “anchor” in an up market, describing several ways dedicated can benefit as conditions tighten:
- Adding incremental capacity units that carry higher margin contribution because some fleet costs are already in place
- Improved pricing on dedicated backhaul freight, which is often spot-based
- Greater ability to secure additional backhaul opportunities in a tight market
- Improved customer retention and new customer wins when shippers prioritize stable capacity
Neal added that in past cycles the company has seen 200 to 400 basis points of operating ratio improvement in dedicated, and he suggested the current cycle could be stronger given cost reductions over the past three years. He said dedicated margins are currently in the upper single digits and that, through a combination of contract rate increases and efficiencies, management expects progress toward double-digit margin territory by year-end.
One-way restructuring: focus on niches and more asset-light execution
Leathers described one-way truckload as increasingly commoditized and said Werner is prioritizing less commoditized niches that require more expertise, including cross-border Mexico and team expedited. He said Werner has operated in Mexico for 27 years and views nearshoring as a real driver of future activity, adding that the competitive set for credible cross-border service is limited compared with the broader truckload market.
For the remainder of one-way, Leathers said the company intends to continue serving customers in a more asset-light format using its PowerLink solution, which is reported within Logistics but integrated operationally with one-way. He said the restructuring is expected to increase miles per truck materially over time and reiterated a previously discussed second-quarter inflection point when the benefits should begin to show more clearly in results.
Demand signals, Logistics pressure, and technology roadmap
On demand, Leathers said current conditions appear stable, with solid activity late in the year continuing through the first quarter despite typical seasonality. He cited inventories returning to at or below pre-COVID levels as supportive for replenishment. He also pointed to improving ISM data and said lower interest rates could help broader truckload demand, even if Werner does not directly participate in all end markets. He added that tax refunds were expected to provide a more confident, near-term positive, particularly given Werner’s exposure to discount retail.
In Logistics, Leathers said the business is experiencing a margin squeeze, describing buy rates as pressured and sell-rate resets taking longer to implement. He said the company’s near-term focus will be on margin over growth, and he highlighted efforts to reduce operating expenses through technology, including AI applications. He said PowerLink performed well during the downturn relative to a pure brokerage model, though it is still under pressure, and suggested that by the second quarter sell-rate resets could improve the company’s ability to grow PowerLink capacity.
Leathers also outlined Werner’s broader technology program, centered on migrating its tech stack to the cloud, improving data accessibility, and converting freight onto a new platform. He said Logistics is fully converted, with dedicated and one-way at varying stages, and that the company continues to hit milestones toward full conversion. He described using AI for call center and processing tasks, and said that as more freight moves into a single network and platform, the company expects greater optimization benefits. He indicated that the “bulk” of that optimization dividend could emerge as the conversion reaches its final stage in 2026.
On capital allocation following the FirstFleet acquisition, Neal said leverage would remain in the low twos, but added that debt paydown is likely to be an initial priority, while the company also remains open to M&A, internal reinvestment, and maintaining flexibility through the year.
About Werner Enterprises (NASDAQ:WERN)
Werner Enterprises, Inc, founded in 1956 by Clarence L. “Chris” Werner, is a leading transportation and logistics provider based in Omaha, Nebraska. The company began as a one?truck operation and has since grown into one of North America’s largest carriers, offering an array of services to support diverse supply chains.
Werner’s core business activities include full truckload dry van services, dedicated contract carriage, intermodal transport and brokerage solutions. The company also provides value-added services such as warehousing, freight management and fleet maintenance through its network of terminals and service centers.
