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Werner Is That You?

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January 02, 2010 – Comments (0) | RELATED TICKERS: WERN , YRCW , ARCB

We noticed a news article last week that said the Board of Directors of Werner Enterprises, Inc. (Nasdaq: WERN) had declared a regular quarterly dividend and that the declaration marked the 23rd year the company had paid a quarterly dividend.

Admittedly we aren't the sharpest pencils in the drawer, but considering the economic conditions of the past year, we figured what the heck, let's at least look at the financials and see what else might be up besides the company's dividends.

Basis
Financial information contained in this report, is based on the company's most recent Form 10-K filing for fiscal year ending December 31, 2008, as filed with the Securities and Exchange Commission on February 27, 2009.

What They Do
Werner Enterprises, Inc. is a premier transportation and logistics company, with coverage throughout North America, Asia, Europe, South America, Africa and Australia.

The company was founded in 1956 and maintains offices in the United States, Canada, Mexico, China and Australia, and is among the five largest truckload carriers in the United States, with a diversified portfolio of transportation services that includes dedicated, medium-to-long-haul, regional and local van capacity, expedited, temperature-controlled and flatbed services.

The company's Value Added Services portfolio includes freight management, truck brokerage, intermodal, load/mode and network optimization and freight forwarding, and through its subsidiary companies, is also a licensed U.S. NVOCC, U.S. Customs Broker, licensed Freight Forwarder in China, licensed China NVOCC, TSA-approved Indirect Air Carrier and IATA Accredited Cargo Agent.

The main commodities of freight transported are retail store merchandise, consumer products, manufactured products and grocery products.

Short-Term Investment
With first resistance at $21.40, a recent close of $19.80, and first support at $19.54, a short-term trade may not be a bad choice at this point.

Another thing that lends itself to a short-term trade at current levels is the 50 day moving average, which has moved upward by almost $0.40 in the past two weeks. With the 52 week high unchanged, we believe the stock is currently in an uptrend.

Long-Term (5 Year Hold) Investment
We looked through the company's latest audited annual financials, and to be quite honest, with the exception of the company's free cash flow of $0.39, nothing really screamed "hey! look over here!".

The company's current, quick, and cash ratios were a little lower than we would have preferred, and we hope that management will get the word and stop providing interest free loans for its suppliers, which is exactly what they are doing since on average the company's receivables are outstanding almost 35 days while payables are outstanding 16 days.

The company has an equity value of just over $20, and tangible book value of almost $10.50. Total debt stood at slightly more than $0.40 and the company's average interest rate on that debt was 0.33%.

Lastly we note that basis the closing stock price on the day the company filed its 10-K of $13.50, the fiscal year 2008 dividend yield was 16.98%.

While we think a reasonable value for the company based on fiscal year 2008 financials is near $60 a share, we simply don't believe the company is going to have a $900+ million fourth quarter, something required to put 2009 on par with prior years.

As a result, we are predicting a potential change in the company's reasonable value from near $60 a share to somewhere in the $25 per share range, or close to current pricing levels.

Accordingly, we think it may be prudent to take a 0.25% position at this time, adding to that position on pullbacks in price over the next 12 months, or until the stock occupies a 1% portfolio position.

Wax

For the Werner Enterprises Raw Value worksheet, please click here.

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