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Knight-Swift (KNX) Up 2.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Knight-Swift Transportation Holdings (KNX - Free Report) . Shares have added about 2.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Knight-Swift due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Earnings Beat in Q1

Knight-Swift’s earnings (excluding 6 cents from non-recurring items) of 83 cents per share surpassed the Zacks Consensus Estimate of 70 cents. Moreover, the bottom line surged 88.6% year over year owing to significant improvement in adjusted operating ratio (operating expenses as a percentage of revenues) in all the segments (Trucking, Logistics and Intermodal).

Total revenues of $1,223 million beat the Zacks Consensus Estimate of $1,192.6 million and increased 8.7% year over year. The upside was driven by increase in revenues in the Trucking, Logistics and Intermodal segments.

Total operating expenses increased 3.7% year over year to $1,060.8 million. Adjusted operating ratio improved to 81.8% from 86.5% in the year-ago quarter. Lower the value of the metric, the better. Knight-Swift’s adjusted operating income rose 50.1% year over year.

Segmental Result

Revenues in the Trucking segment totaled (excluding fuel surcharge and inter-segment transactions) $872.8 million, up 6.3% year over year. Results were driven by 7.7% increase in ave, age revenue per tractor. Average revenue per tractor was strong in the quarter owing to 16.1% rise in revenue per loaded mile (excluding fuel surcharge and intersegment transactions). Adjusted segmental operating income also moved up 43.3% to $158.8 million. Adjusted operating ratio (operating expenses as a percentage of revenues) increased 470 basis points (bps) to 81.8%.

Revenues in the Logistics segment (excluding inter-segment transactions) amounted to $115.7 million, up 50.8% year over year due to 43% increase in brokerage revenue per load and 5.4% increase in load volumes. Both adjusted operating ratio improved 170 bps to 93.5% and segmental adjusted operating income surged 103.7% to $7.6 million.

Revenues in the Intermodal segment (excluding inter-segment transactions) totaled approximately $107 million, up 13.1% year over year as a result of increasing load count and revenue per load by 2.6% and 10.2%, respectively. Segmental adjusted operating ratio increased 600 bps to 96.8%. Segmental operating income was $3.5 million in the quarter, up more than 100% year over year.

Liquidity

Knight-Swif exited the first quarter with cash and cash equivalents of $194.7 million compared with $156.7 million at the end of 2020. During the first quarter of 2021, the company returned $68 million to shareholders in the form of dividends and through share buybacks.

2021 Guidance

Knight-Swift raised its adjusted earnings per share guidance for the full year 2021. It now expects its EPS to be in the band of $3.45-$3.60 (previous expectation: $3.20-$3.40) for full year 2021. 

Net capital expenditures are anticipated between $450 million and $500 million (in-line with the previous declaration).  Effective tax rate is anticipated in the range of 25.5-27.0% (in line with the previous declaration) before discrete items.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, Knight-Swift has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Knight-Swift has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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