Werner Enterprises Is More Defensive, But The Street Doesn't Care

Looking at Werner Enterprises (NASDAQ:WERN) back in March of this year, I thought that the company’s stronger skew to the more stable dedicated carrier business (contracted truckload trucking for customers like retailers) would serve the company in good stead as the freight cycle peaked and then rolled over, sending volume expectations and spot rates lower. Well, the cycle has rolled over, but Werner hasn’t been quite as defensive as I’d hoped – the shares have dropped about 10% since then, a little worse than Heartland Express (HTLD), which typically has some counter-cyclical appeal, and a little better than Knight-Swift (KNX).

At the risk of sounding a little flippant, it’s the rare trucking stock that doesn’t look cheap to me today, leading me to wonder whether my assumptions for the next three years (and beyond) are simply too bullish or whether the Street is doing what it often does with cyclical stocks – dumping them almost irrespective of longer-term value in favor of stocks more likely to show earnings growth and margin leverage over the next year or two.

I think it’s the latter, and Werner does still look undervalued to me. It’s a more defensive name, and this would seem like a better time to think of defense first, but investors should remember that cyclical plays are meant as trades (not long-term buy-and-holds) and there will come a time when a shift to more aggressive carriers will be in order.

 

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Werner Enterprises Is More Defensive, But The Street Doesn't Care