The asset-light transportation and logistics service provider anticipates third quarter 2015 revenues will be between $490 million and $500 million, down from previous projections of $530 million to $555 million.
Roadrunner Transportation Systems, Inc. has revised downward its expectations for revenues and earnings per share in the third quarter and fourth quarters of 2015.
The asset-light transportation and logistics service provider anticipates third quarter 2015 revenues will be between $490 million and $500 million, down from previous projections of $530 million to $555 million, according to a statement from the company.
Roadrunner said it expects diluted earnings per share available to common stockholders, excluding transaction expenses, to be between $0.14 per share and $0.17 per share for the third quarter, down from $0.43 per share to $0.47 per share from prior guidance.
The company attributed the reduction in the third quarter 2015 revenue and EPS projections to:
- Losses associated with the termination of certain independent contractor lease purchase guaranty programs, expected to have a negative impact of $0.08 per share;
- Charges associated with increased accidents and a corresponding increase in insurance and claims expense, expected to have an impact of $0.06 per share;
- And continuing soft demand for TL, LTL, and intermodal services from customers in selected industrial sectors.
“Although certain parts of our business, such as OEM and international, realized expected business levels during the quarter, our TL, LTL, and intermodal services saw continuing soft demand from customers,” Mark DiBlasi, president and CEO of Roadrunner, said in a statement. “Historically, the third quarter starts slow and finishes strong.”
DiBlasi said that volumes were weaker than normal in July 2015, and the company did experience the typical boost in volumes in August and September, resulting in lower-than-anticipated overall volumes.
“Our TL segment is heavily weighted toward refrigerated food items, which were impacted by lower than expected poultry, beef and produce freight due to the recent Midwest and West Coast droughts and the bird flu epidemic,” he added. “Intermodal volumes were also lower than anticipated, especially in the West Coast ports. Our LTL segment was impacted by an overall weak economic climate in the markets we serve, as well as aggressive pricing activity, particularly in September. Finally, excess capacity during the quarter put downward pressure on non-contractual pricing across all of our segments, particularly spot market pricing and certain LTL pricing.”
Looking forward, DiBlasi said the company does not expect a rebound in demand or rates in the fourth quarter of 2015. As a result, Roadrunner has also lowered its Q4 2015 expectations for revenues to between $485 million and $510 million – down 4 percent to 9 percent – and EPS to between $0.31 per share and $0.35 per share.
According to Nate Brochman, CFA with investment firm William Blair & Company, however, Roadrunner’s stock is still attractive for “patient, long-term investors.”
“At about $18, the stock is trading at 11 times our new 2016 EPS estimate,” said Brochman. “We expect the stock to react negatively on Tuesday (October 27) to the softer guidance and outlook. While we do not see a positive catalyst to drive better industrial activity and LTL volume in the near future, we believe the operating environment is showing some signs of stability, which should allow Roadrunner to adjust its business and drive some operational improvement over the next year.
The company is expected to release and discuss its full third quarter earnings report on a conference call Thursday, Nov. 5.