Werner warns of fuel’s hit to earnings

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Werner Enterprises says that the surge in diesel prices during August and September could reduce earnings by 6 to 7 cents per share in the third quarter compared to the same 2004 period if prices remain at the levels experienced on Tuesday, Sept. 20 for the final 10 days of the quarter.

In its second-quarter filing with the Securities and Exchange Commission, Werner estimated that if prices remained at the levels seen on the date of the filing, Aug. 2, the negative impact of fuel expense on earnings for the third quarter would be about 2 to 3 cents per share. At the time, the carrier warned that if fuel prices averaged 10 cents per gallon higher throughout the third quarter, the hit to earnings would be in the range of 3 to 4 cents per share.

But during August, diesel prices rose about 25 cents a gallon and another 35 cents a gallon in the four days following Hurricane Katrina, Werner said. Prices slowly returned to pre-Katrina levels over two weeks, but they spiked again by 18 cents on Sept. 20 due to new concerns over Hurricane Rita.

Werner also raised concerns over the short-term impact of rapidly rising prices, such as those that occurred during September. Most of the company’s fuel surcharge programs adjust once a week based on the Department of Energy national survey price reported each Monday afternoon. For example, the DOE price on Sept. 19 declined by almost 12 cents a gallon compared to the previous Monday, reducing the week’s fuel surcharge rate.

But since diesel prices surged 18 cents on Sept. 20, Werner is paying substantially higher fuel prices this week that are not being recovered in this week’s fuel surcharge rate. The effects of these short-term problems are difficult to quantify, but they could lead to an even greater impact on earnings than estimated, Werner said.