Editor’s Note: Updates throughout with material from company call for analysts
Semi-trailer manufacturer Wabash National Corp. (NYSE: WNC) reported record revenue and higher profits in the third quarter led by growth in its final mile and commercial trailer segments.
Net sales for the third quarter 2019 increased 5% to $581 million from $553 million in the prior year quarter. Net income for the third quarter 2019 was $25.5 million, or $0.46 per diluted share, compared with $4.7 million or $0.08 in the third quarter of 2018.
Operating income of $38.3 million equated to a 6.6% consolidated operating margin compared with 5.2% in the July-September period a year ago.
“Q3 is a significant milestone of the process improvements we’ve implemented over the last year that has allowed us to stabilize challenges in the manufacturing environment and excel operationally,” said Brent Yeagy, Wabash president and CEO.
Wabash successfully pursued changes in its supply chain, handled incoming information from chassis makers and found ways to use its existing capacity to grow its final mile business, Yeagy said.
“In any environment, 140 basis points of overall operating margin improvement is a significant accomplishment. Similarly, 580 basis points of margin expansion in Final Mile Products shows considerable underlying improvements,” he said.
Wabash raised its full-year guidance to $1.67 per share, the midpoint of a narrower range of $1.64 to $1.70. It repurchased $9 million worth of outstanding shares, leaving $80 million in the current authorization for additional buybacks.
Softening market
Wabash said it agrees with estimates for industry trailer deliveries in 2020 to drop to a range of 265,000 to 270,000 from record deliveries this year expected to be around 326,000.
“We’re coming off a record year this year down to a not-too-unattractive level,” Yeagy told analysts on a conference call Nov. 6. “It should be a good market for the trailer industry.”
Wabash delivered 14,450 trailers in the July-to-September quarter with a few hundred units added to inventory because of a softening in the freight market in late July and early August. The company expects to deliver 14,000 to 15,000 trailers in the fourth quarter.
Yeagy said Wabash has hedged its $800 million backlog for the rest of 2019 and the first quarter of 2020. It began planning for lower volumes 18 months ago, adjusting production as needed. Additional changes can be managed by adding and dropping overtime hours.
Segment results
Commercial Trailer Products’ net sales increased 12.0 million, or 3.3%, to $380 million. Operating income increased $4.1 million, or 12.5% to $36.5 million, or 9.6% of net sales. Trailers sold for about $2,000 more than in the third quarter a year ago.
Diversified Products’ net sales declined $9.2 million, or 9%, to $93 million because of a business divestiture, which was partially offset by higher demand for tank trailers. Operating income was $7.2 million, or 7.7% of net sales.
Final Mile Products’ net sales grew $26.5 million, or 30.4%, to $114 million. Operating income was $4.6 million, or 4.1% of net sales.
Wabash acquired Supreme Industries Inc. in 2017 for $364 million in cash. The Goshen, Indiana company’s factories were underutilized. While still operating on a single shift, the former Supreme facilities provide final-mile growth capacity, Yeagy said.
“The capacity we have is really untapped,” he said. “We have the brick and mortar to grow this over the coming years,” he said. “As we look at the growth rates that First Mile Products sees, we are confident we can continue to grow share.”
Wabash first-to-final mile products include dry freight and refrigerated trailers, platform trailers, bulk tank trailers, dry and refrigerated truck bodies, truck-mounted tanks, intermodal equipment, structural composite panels and products, trailer aerodynamic solutions, and specialty food grade and pharmaceutical equipment.