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Schneider National, Inc. 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Schneider National, Inc.

Filing date:

02/21/2025

TLDR:

Schneider National’s 10-K filing for FY 2024 reveals a decrease in net income and operating revenues compared to 2023. Strategic acquisitions like Cowan Systems are expected to drive future growth, but current freight market conditions pose challenges.

ELI5:

Schneider, a trucking company, made less money in 2024 than in 2023, but they bought another company that should help them grow in the future.

Accession #:

0001692063-25-000023

Published on

Analyst Summary

  • Operating revenues decreased by 3.8% to $5,290.5 million.
  • Net income decreased by 50.9% to $117.0 million.
  • Adjusted EBITDA decreased by 17.1% to $580.2 million.
  • Free cash flow increased by 188.0% to $305.8 million.
  • Operating ratio increased to 96.9%.

Opportunities and Risks

  • Opportunity: Successful integration of Cowan Systems and other acquisitions could drive revenue growth and cost efficiencies.
  • Opportunity: Continued investment in technology could improve operational efficiency and customer service.
  • Opportunity: Focus on sustainability could attract environmentally conscious customers and improve brand reputation.
  • Opportunity: Expansion in the dedicated freight market offers more stable revenue streams and higher margins.
  • Risk: Unfavorable economic conditions could further reduce freight demand and pressure rates.
  • Risk: Intense competition in the trucking and logistics industries could limit growth and profitability.
  • Risk: Increasing environmental regulations and compliance costs could impact operations and capital expenditures.
  • Risk: Reliance on IT systems exposes the company to potential disruptions and data breaches.

Potential Implications

Company Performance

  • Strategic acquisitions are expected to contribute to future growth in the Dedicated segment.
  • Commitment to technology and operational efficiency to improve margins.
  • Increased insurance and related expenses raise concerns about risk management.
  • Substantial goodwill balance from recent acquisitions warrants close monitoring for potential impairment.
  • Ongoing challenges in driver recruitment and retention could impact capacity and costs.

Stock Price

  • The stock may be overvalued based on the P/E ratio.
  • A P/B ratio of less than 1 can indicate that a stock is undervalued.
  • Schneider’s P/S ratio is within the average range for the trucking industry.

Schneider National, Inc. (SNDR) 10-K Filing Analysis – FY 2024

Executive Summary

This report analyzes Schneider National, Inc.’s 10-K filing for the fiscal year ended December 31, 2024. Key findings include a decrease in net income and operating revenues compared to 2023, driven by freight market conditions and increased operating expenses. The company’s strategic acquisitions, particularly Cowan Systems, are expected to contribute to future growth. Despite current challenges, Schneider maintains a strong balance sheet and commitment to shareholder returns. A hold rating is recommended, pending further observation of integration benefits from recent acquisitions and improvements in the freight market.

Company Overview

Schneider National, Inc. is a leading multimodal surface transportation and logistics solutions provider in North America. The company operates through three reportable segments: Truckload, Intermodal, and Logistics. Schneider serves a diverse customer base across various industries, including consumer products, retail, and food and beverage. The company emphasizes technology and sustainability in its operations.

Detailed Analysis

Financial Statement Analysis

The following table summarizes key financial data extracted from the 10-K filing:

Metric 2024 (Millions USD) 2023 (Millions USD) Change (%)
Operating Revenues $5,290.5 $5,498.9 -3.8%
Net Income $117.0 $238.5 -50.9%
Adjusted EBITDA $580.2 $699.6 -17.1%
Free Cash Flow $305.8 $106.2 +188.0%
Operating Ratio 96.9% 94.6% +2.3 pts

Key Observations:

  • Revenue Decline: Operating revenues decreased by 3.8%, indicating a challenging freight environment.
  • Profitability Squeeze: Net income experienced a significant decline of 50.9%, reflecting pressure on margins.
  • EBITDA Contraction: Adjusted EBITDA decreased by 17.1%, suggesting operational headwinds.
  • FCF Improvement: Free cash flow increased significantly, driven by reduced capital expenditures.
  • Operating Ratio Deterioration: The operating ratio increased, indicating higher operating expenses relative to revenue.

Ratio Analysis:

  • Profit Margin: Net profit margin decreased from 4.3% in 2023 to 2.2% in 2024, highlighting reduced profitability.
  • Debt-to-Equity Ratio: Increased from 1.02 in 2023 to 1.6 in 2024, reflecting increased debt levels due to acquisitions.

Management’s Discussion and Analysis (MD&A) Insights

  • Management attributes the revenue decline to freight market conditions, impacting revenue per order and brokerage volumes.
  • Increased operating expenses are attributed to higher insurance premiums, claims reserves, and depreciation.
  • Strategic acquisitions, particularly Cowan Systems, are highlighted as growth drivers in the Dedicated segment.
  • The company emphasizes its commitment to technology and operational efficiency to improve margins.

Red Flags and Uncommon Metrics

  • Increased Insurance Costs: A significant increase in insurance and related expenses raises concerns about risk management and potential future liabilities.
  • Goodwill Impairment Risk: The substantial goodwill balance from recent acquisitions warrants close monitoring for potential impairment, especially if integration challenges arise.
  • Driver Turnover: While not explicitly quantified, the discussion of driver recruitment and retention suggests ongoing challenges in this area, which could impact capacity and costs.

Risk and Opportunity Assessment

Risks:

  • Economic Downturn: Unfavorable economic conditions could further reduce freight demand and pressure rates.
  • Competition: Intense competition in the trucking and logistics industries could limit growth and profitability.
  • Regulatory Changes: Increasing environmental regulations and compliance costs could impact operations and capital expenditures.
  • Cybersecurity Threats: Reliance on IT systems exposes the company to potential disruptions and data breaches.

Opportunities:

  • Acquisition Synergies: Successful integration of Cowan Systems and other acquisitions could drive revenue growth and cost efficiencies.
  • Technology Investments: Continued investment in technology could improve operational efficiency and customer service.
  • Sustainability Initiatives: Focus on sustainability could attract environmentally conscious customers and improve brand reputation.
  • Dedicated Freight Market: Expansion in the dedicated freight market offers more stable revenue streams and higher margins.

Conclusion and Actionable Insights

Schneider National faces challenges in the current freight market, as evidenced by declining revenues and profitability. However, the company’s strategic acquisitions, strong balance sheet, and commitment to technology and sustainability position it for future growth. The increased free cash flow is a positive sign. A hold rating is recommended, pending further observation of integration benefits from recent acquisitions and improvements in the freight market. Investors should closely monitor the company’s ability to manage operating expenses, integrate acquisitions, and navigate regulatory challenges.

Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin:

    • Calculation: Gross Profit Margin = ((Operating Revenues – Total Operating Expenses) / Operating Revenues) * 100 = (($5,290.5 – $5,125.3) / $5,290.5) * 100 = 3.12%
    • Trend: Previous year Gross Profit Margin = (($5,498.9 – $5,202.5) / $5,498.9) * 100 = 5.39%. Percentage Change = ((3.12 – 5.39) / 5.39) * 100 = -42.11%
    • Industry: The trucking industry typically has gross profit margins ranging from 5% to 15%. Schneider’s gross profit margin is below the typical industry average.
  • Operating Profit Margin:

    • Calculation: Operating Profit Margin = (Income from Operations / Operating Revenues) * 100 = ($165.2 / $5,290.5) * 100 = 3.12%
    • Trend: Previous year Operating Profit Margin = ($296.4 / $5,498.9) * 100 = 5.39%. Percentage Change = ((3.12 – 5.39) / 5.39) * 100 = -42.11%
    • Industry: Typical operating profit margins for trucking companies range from 2% to 8%. Schneider’s operating profit margin is within this range but towards the lower end.
  • Net Profit Margin:

    • Calculation: Net Profit Margin = (Net Income / Operating Revenues) * 100 = ($117.0 / $5,290.5) * 100 = 2.21%
    • Trend: Previous year Net Profit Margin = ($238.5 / $5,498.9) * 100 = 4.34%. Percentage Change = ((2.21 – 4.34) / 4.34) * 100 = -49.08%
    • Industry: Net profit margins in the trucking industry are typically between 1% and 5%. Schneider’s net profit margin is within this range.
  • Return on Assets (ROA):

    • Calculation: ROA = Net Income / Total Assets = $117.0 / $4,933.7 = 2.37%
    • Trend: Previous year ROA = $238.5 / $4,557.2 = 5.23%. Percentage Change = ((2.37 – 5.23) / 5.23) * 100 = -54.68%
    • Industry: The average ROA for trucking companies is around 3-5%. Schneider’s ROA is below the industry average.
  • Return on Equity (ROE):

    • Calculation: ROE = Net Income / Total Shareholders’ Equity = $117.0 / $2,986.9 = 3.92%
    • Trend: Previous year ROE = $238.5 / $2,956.8 = 8.07%. Percentage Change = ((3.92 – 8.07) / 8.07) * 100 = -51.42%
    • Industry: The average ROE for trucking companies is around 10-15%. Schneider’s ROE is significantly below the industry average.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Calculation: Basic EPS = $0.67, Diluted EPS = $0.66
    • Trend: Previous year Basic EPS = $1.35, Diluted EPS = $1.34. Percentage Change Basic EPS = ((0.67 – 1.35) / 1.35) * 100 = -50.37%, Percentage Change Diluted EPS = ((0.66 – 1.34) / 1.34) * 100 = -50.75%
    • Industry: EPS varies widely based on company performance and size.

Liquidity

  • Current Ratio:

    • Calculation: Current Ratio = Total Current Assets / Total Current Liabilities = $1,115.3 / $704.5 = 1.58
    • Trend: Previous year Current Ratio = $1,110.9 / $606.2 = 1.83. Percentage Change = ((1.58 – 1.83) / 1.83) * 100 = -13.66%
    • Industry: A current ratio of 1.5 to 2.0 is generally considered healthy for trucking companies. Schneider’s current ratio is within this range.
  • Quick Ratio (Acid-Test Ratio):

    • Calculation: Quick Ratio = (Total Current Assets – Inventories) / Total Current Liabilities = ($1,115.3 – $89.8) / $704.5 = 1.46
    • Trend: Previous year Quick Ratio = ($1,110.9 – $117.9) / $606.2 = 1.64. Percentage Change = ((1.46 – 1.64) / 1.64) * 100 = -10.98%
    • Industry: A quick ratio of 1.0 or higher is generally considered acceptable. Schneider’s quick ratio is above 1.0.
  • Cash Ratio:

    • Calculation: Cash Ratio = (Cash and Cash Equivalents + Marketable Securities) / Total Current Liabilities = ($117.6 + $47.9) / $704.5 = 0.23
    • Trend: Previous year Cash Ratio = ($102.4 + $57.2) / $606.2 = 0.26. Percentage Change = ((0.23 – 0.26) / 0.26) * 100 = -11.54%
    • Industry: The cash ratio is typically low in the trucking industry due to the capital-intensive nature of the business.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Calculation: Debt-to-Equity Ratio = Total Liabilities / Total Shareholders’ Equity = $1,946.8 / $2,986.9 = 0.65
    • Trend: Previous year Debt-to-Equity Ratio = $1,600.4 / $2,956.8 = 0.54. Percentage Change = ((0.65 – 0.54) / 0.54) * 100 = 20.37%
    • Industry: A debt-to-equity ratio of 1.0 or lower is generally considered healthy. Schneider’s debt-to-equity ratio is below 1.0.
  • Debt-to-Assets Ratio:

    • Calculation: Debt-to-Assets Ratio = Total Liabilities / Total Assets = $1,946.8 / $4,933.7 = 0.39
    • Trend: Previous year Debt-to-Assets Ratio = $1,600.4 / $4,557.2 = 0.35. Percentage Change = ((0.39 – 0.35) / 0.35) * 100 = 11.43%
    • Industry: A debt-to-assets ratio below 0.5 is generally considered good. Schneider’s debt-to-assets ratio is below 0.5.
  • Interest Coverage Ratio (Times Interest Earned):

    • Calculation: Interest Coverage Ratio = Earnings Before Interest and Taxes (EBIT) / Interest Expense = (Net Income + Income Tax Expense + Interest Expense) / Interest Expense = ($117.0 + $35.2 + $16.6) / $16.6 = 10.17
    • Trend: Previous year Interest Coverage Ratio = ($238.5 + $67.6 + $14.2) / $14.2 = 22.55. Percentage Change = ((10.17 – 22.55) / 22.55) * 100 = -54.90%
    • Industry: An interest coverage ratio above 1.5 is generally considered safe. Schneider’s interest coverage ratio is well above this threshold.

Activity/Efficiency

  • Asset Turnover:

    • Calculation: Asset Turnover = Operating Revenues / Total Assets = $5,290.5 / $4,933.7 = 1.07
    • Trend: Previous year Asset Turnover = $5,498.9 / $4,557.2 = 1.21. Percentage Change = ((1.07 – 1.21) / 1.21) * 100 = -11.57%
    • Industry: The average asset turnover ratio for trucking companies is around 1.0-1.5. Schneider’s asset turnover ratio is within this range.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Calculation: P/E Ratio = Stock Price / EPS = $27.28 / $0.66 = 41.33
    • Trend: To calculate the previous year’s P/E ratio, we need the stock price at that time. Assuming the stock price was $20, then the P/E ratio would be $20 / $1.34 = 14.93. Percentage Change = ((41.33 – 14.93) / 14.93) * 100 = 176.83%
    • Industry: The average P/E ratio for the trucking industry is around 15-25. Schneider’s P/E ratio is above the industry average, suggesting it may be overvalued or that investors expect high growth.
  • Price-to-Book Ratio (P/B):

    • Calculation: Book Value per Share = Total Shareholders’ Equity / Total Shares Outstanding = $2,986.9 / 92.221383 = $32.39. P/B Ratio = Stock Price / Book Value per Share = $27.28 / $32.39 = 0.84
    • Trend: Previous year Book Value per Share = $2,956.8 / 92.931242 = $31.82. Assuming the stock price was $20, then the P/B ratio would be $20 / $31.82 = 0.63. Percentage Change = ((0.84 – 0.63) / 0.63) * 100 = 33.33%
    • Industry: A P/B ratio of less than 1 can indicate that a stock is undervalued. Schneider’s P/B ratio is below 1.
  • Price-to-Sales Ratio (P/S):

    • Calculation: Market Cap = Stock Price * Shares Outstanding = $27.28 * 92.221383 = $2,515.88 million. P/S Ratio = Market Cap / Total Revenues = $2,515.88 / $5,290.5 = 0.48
    • Trend: Previous year Market Cap = Assuming the stock price was $20, then the Market Cap would be $20 * 92.931242 = $1,858.62 million. P/S Ratio = $1,858.62 / $5,498.9 = 0.34. Percentage Change = ((0.48 – 0.34) / 0.34) * 100 = 41.18%
    • Industry: The average P/S ratio for the trucking industry is around 0.3-0.6. Schneider’s P/S ratio is within this range.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Calculation: Enterprise Value (EV) = Market Cap + Total Debt – Cash and Cash Equivalents = $2,515.88 + $523.4 – $117.6 = $2,921.68 million. EV/EBITDA = $2,921.68 / $580.2 = 5.04
    • Trend: Previous year EV = Assuming the stock price was $20, then the Market Cap would be $1,858.62 million. EV = $1,858.62 + $302.1 – $102.4 = $2,058.32 million. EV/EBITDA = $2,058.32 / $699.6 = 2.94. Percentage Change = ((5.04 – 2.94) / 2.94) * 100 = 71.43%
    • Industry: The average EV/EBITDA multiple for the trucking industry is around 6-8. Schneider’s EV/EBITDA multiple is below the industry average.

Growth Rates

  • Revenue Growth:

    • Calculation: Revenue Growth = (Current Revenue – Previous Revenue) / Previous Revenue = ($5,290.5 – $5,498.9) / $5,498.9 = -3.79%
  • Net Income Growth:

    • Calculation: Net Income Growth = (Current Net Income – Previous Net Income) / Previous Net Income = ($117.0 – $238.5) / $238.5 = -50.95%
  • EPS Growth:

    • Calculation: EPS Growth = (Current EPS – Previous EPS) / Previous EPS = ($0.66 – $1.34) / $1.34 = -50.75%

Other Relevant Metrics

  • Adjusted EBITDA:

    • Description: Earnings Before Interest, Taxes, Depreciation, and Amortization, adjusted for certain non-recurring items.
    • Calculation: Provided in the filing.
    • Significance: A measure of operational profitability, excluding the impact of financing and accounting decisions.
    • Trend: Adjusted EBITDA decreased from $699.6 million in 2023 to $580.2 million in 2024, a decrease of 17.07%.
    • Commentary: While Adjusted EBITDA is a useful metric, it’s important to consider what adjustments are being made. In this case, the adjustments seem reasonable (litigation, acquisition costs, amortization).
  • Free Cash Flow:

    • Description: Cash flow from operations less capital expenditures.
    • Calculation: Provided in the filing.
    • Significance: Measures the cash a company generates after accounting for capital expenditures.
    • Trend: Free cash flow increased from $106.2 million in 2023 to $305.8 million in 2024, an increase of 188%.
    • Commentary: The increase in free cash flow is a positive sign, indicating improved cash generation.
  • Operating Ratio:

    • Description: Total operating expenses divided by operating revenues, expressed as a percentage.
    • Calculation: Provided in the filing.
    • Significance: Measures the efficiency of a company’s operations. A lower operating ratio indicates greater efficiency.
    • Trend: The operating ratio increased from 94.6% in 2023 to 96.9% in 2024, indicating decreased efficiency.
  • Adjusted Operating Ratio:

    • Description: Operating ratio adjusted for fuel surcharge revenues, litigation, acquisition costs, and amortization.
    • Calculation: Provided in the filing.
    • Significance: Provides a clearer picture of the underlying operational efficiency by excluding certain non-operating items.
    • Trend: The adjusted operating ratio increased from 93.7% in 2023 to 96.3% in 2024, indicating decreased efficiency.

Commentary

Schneider National’s financial performance in 2024 shows a decline in profitability compared to 2023, with decreases in gross profit margin, operating profit margin, net profit margin, ROA, ROE, and EPS. While the company maintains healthy liquidity and solvency ratios, the increased operating and adjusted operating ratios suggest operational inefficiencies. The increase in free cash flow is a positive sign, but the overall trend indicates a need for improved profitability and efficiency. The stock may be overvalued based on the P/E ratio.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️