In July, trucking and transportation logistics company Werner Enterprises Inc. (NASDAQ: WERN) announced 2Q 2007 earnings that essentially repeated all of the problems that bedeviled the company in 1Q 2007: soft demand for freight shipping due to slowdowns in the housing and automotive industries; rising costs for fuel, insurance and claims; too many trucks chasing too few truckloads; too much lower profit margin freight; inefficiencies matching trucks to freight resulting in too many empty miles. Well, at least the weather was better in the spring quarter than during the winter. Given the continuing problems, it should come as no surprise that 2Q results pretty much mirror 1Q's disappointing results. Revenues were just above flat at $531 million for the quarter. EPS declined 15% to $0.30.

On a more positive note, Werner Enterprises has a very proactive management team that is trying to position Werner to be one of the survivors in the trucking industry when the dust settles over the next 18 months or so. At that time, Werner management is betting that freight shipment prices will rise, possibly dramatically, as demand will finally exceed supply of available trucks. Werner is reducing its truck fleet size to match demand, and has developed a much more efficient system to match cyclical freight load demands to available trucks. With increased scheduling efficiencies, Werner is going after higher profit margin freight loads and aggressively cutting the number of empty miles its trucks run. Werner is also running a truck remarketing program to clear its inventory of used trucks and trailers. During 2Q 2007, sales of used equipment added $7.6 million to the bottom line.

Werner repaid $30 million in debt during 2Q 2007, leaving $50 million in debt still on the books. The company repurchased 1.5 million worth of its own stock for a total of $28.6 million. Given that most of the news from Werner has been negative for months, why is the stock up 10% since the beginning of the year, reaching a 52-week high of $22.00 last week before closing Friday at $20.22?

Most of the major long-haul trucking companies have reported quarterly earnings by now, and the news has been about as welcome as a state trooper with a ticket quota to meet. All trucking companies were affected by the same negative factors for the winter quarter:

1. Slowing economy, with particular weakness in the housing and auto sales sectors, resulting in weakening demand for the past eight months.

2. Excess capacity, though not necessarily excess drivers, as many companies bought new truck engines prior to the deadline for more fuel efficient (and expensive) and less polluting engines.

3. Soaring fuel costs, up 17 cents per gallon in March alone, with no end in sight for the next several quarters.

4. Wretched weather for days on end in many parts of the country.

Despite what might initially appear to be a uniformly negative scenario, the long-haul trucking sector is more fragmented than investors may realize, so results were NOT NEGATIVE across the board. In many cases, revenues were up, but then again, so were operating expenses. The degree to which senior management can control costs and utilize existing equipment effectively often made the difference.