Schneider National, Inc. Q3 FY2026 earnings call

• Strategic Partnership: Announced an agreement with Norfolk Southern to serve as the primary rail provider for the eastern intermodal network starting January 1, 2027. This expands reach and creates opportunities to convert truckload shipments to intermodal.
• Market Dynamics: Supply remains constrained by driver availability, elevated costs, and regulatory enforcement (e.g., entry-level training). Demand is stable but uneven, with seasonal moderation in Q3. Industry costs are 30% above five-year averages, supporting pricing recovery.
• Pricing Power: Contract pricing continues to advance. In-network renewals reached nearly 20%, with intermodal renewal pricing at its strongest since the pandemic. Revenue per order in logistics saw double-digit YoY growth.
• Cost Savings: On track to deliver the $40 million cost savings target, driven by non-driver headcount reduction, third-party spend management, and network driver productivity.
• Operational Execution: Truckload earnings doubled YoY due to productivity and disciplined pricing. Intermodal volumes declined modestly, but revenue per order grew due to mix and pricing. Logistics faced headwinds from a confidential claim settlement, largely offset by a separate favorable settlement benefit.

Truckload: Revenue excluding fuel surcharge was $625 million, essentially flat year-over-year. Operating income more than doubled to $44 million, with an operating ratio of 93%. Truckload contributed approximately 46% of total segment revenue (based on combined segment revenues). Network: Part of the Truckload segment; delivered first positive quarterly earnings in over three years. Revenue per truck per week grew >20% year-over-year. Intermodal: Revenue excluding fuel surcharge was $288 million, up ~2% year-over-year. Operating income increased 35% to $23 million, with an operating ratio of 92.1%. Intermodal contributed approximately 21% of total segment revenue. Logistics: Revenue excluding fuel surcharge was $373 million, up >12% year-over-year. Operating income was approximately breakeven ($0), compared to $6 million in the prior year, due to a confidential claim settlement. Logistics contributed approximately 28% of total segment revenue.

• Full Year 2026 Adjusted Diluted EPS: Updated guidance raised to a range of $1.00 - $1.10, up from previous expectations. The low-end revision reflects progress on strategic initiatives and margin recovery.
• Capital Expenditures: Full-year net capital expenditures expected to be $325 million - $350 million, down from prior guidance due to stronger equipment sale proceeds, but ahead of 2025 actuals.
• Outlook Assumptions: Guidance assumes continued pricing improvement, additional benefits from productivity/cost initiatives, and accounts for risks around holiday demand and capacity conditions.

• Claims and Insurance Costs: Logistics segment impacted by a confidential claim settlement, reflecting structural insurance cost inflation post-Montgomery decision. While offset by a separate favorable settlement, brokerage-related claims remain a lumpy risk.
• Customer Churn: Loss of a large dedicated customer contributed to sequential earnings moderation in Truckload and fleet reductions.
• Regulatory Environment: Ongoing regulatory enforcement regarding driver training and compliance limits irrational capacity entry but adds operational complexity.
• M&A Uncertainty: Benefits from potential Norfolk Southern/Union Pacific merger are not assumed in current expectations; execution risks exist if the merger does not close.

Q: Analyst asked for views on 2027 early bid season and demand visibility given supply conditions. / A: CEO noted industry costs are 30% above 5-year averages, so rate recovery has significant runway but won't happen linearly or fully in one year. He emphasized that while supply drives current conditions, any blip in demand could accelerate market shifts. Regarding peak season, he described it as 'normal' so far, with e-commerce being a key swing factor for guidance variance.

Q: Analyst asked about the Norfolk Southern deal's disruption, P&L impact of insurance/interest, and exclusivity vs. other rail partners. / A: CEO stated the NS deal is strategically beneficial regardless of the UP merger, citing successful CPKC integration in Mexico as proof. CFO explained the P&L volatility stems from two offsetting items: a logistics claim settlement and a reversal of interest accruals from a favorable outcome on a separate prior-period claim. CEO confirmed CPKC relationship remains strong and unaffected.

Q: Analyst questioned how Schneider navigates the difficult driver hiring environment compared to peers. / A: CEO attributed success to discipline, aligning pay increases with rate recovery rather than throwing money at problems. He highlighted focusing on driver experience through better freight selection, work configurations, and AI-enabled recruiting tools. He noted this approach allows for surgical investments where returns are commensurate, particularly in intermodal dray.

Q: Analyst asked about the transition timeline for the Norfolk Southern deal and volume impact. / A: CEO confirmed implementation begins November 2026 for a Jan 1, 2027 full switch. He cited lessons learned from the Union Pacific transition, noting no customer or driver loss during that process. He assured that volume growth would not be paused for the transition, emphasizing that dray capacity constraints, not rail transitions, limit intermodal growth.

Q: Analyst asked about the durability of the current upcycle and capacity trends. / A: CEO argued the cycle is durable because entry-level driver training standards have tightened significantly since 2021-2022, preventing a flood of unqualified drivers. He believes the last deep down-cycle took four years to recover from, so price parity will take time. He expects capacity to flatten rather than shrink further, creating opportunities for disciplined carriers like Schneider to participate in future growth.