Werner Enterprises expects to continue expanding its dedicated fleet as large enterprise shippers have a “flight to quality,” or a return to quality when booking services, Chris Neil, SVP of pricing and strategic planning, said at the Deutsche Bank Transportation Conference on Aug. 12.
“Reliability is back in focus, and when that is at the forefront of shippers minds, that's when our dedicated offering is going to excel the most,” Neil said.
“We had a streak of new winds that we papered earlier in the year,” he continued, which the company is currently implementing across several verticals. “So we're happy with momentum in dedicated, which includes an increase in demand,” he said.
The fleet size for dedicated ended Q2 with 4,890 tractors, up from 4,825 tractors a year ago, according to an August securities filing.
“The implementation of new dedicated fleets signed last quarter is progressing well and continuing to ramp into Q3 as we hire drivers and build fleets to targeted levels. Additional fleets were awarded in the quarter, and the opportunity pipeline remains strong,” CEO Derek Leathers said in a Q2 earnings call.
However, even with stronger demand and promising conversations with shippers, dedicated revenue net of fuel was down 0.7%, Leathers said. He added that it takes time for new fleets to meet targeted utility as hired drivers are integrated into the fleet, equipment is positioned and routes are optimized.
The company is also relying on its dedicated business and expects further growth in that area. Its “long term contracts of three to five years, very high service requirements and on time service requirements,” generate more stable earnings, CFO Chris Wikoff said at the conference.
The company’s dedicated business is within its Truckload Transportation Services segment, or TTS. The dedicated service represents 70% of the company’s total revenues and about two-thirds of the TTS segment. One-way truckload services are also part of the segment.
