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Knight-Swift (KNX) Up 1.7% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Knight-Swift Transportation Holdings (KNX - Free Report) . Shares have added about 1.7% in that time frame, underperforming 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 Q3

Knight-Swift’s earnings (excluding 7 cents from non-recurring items) of $1.30 per share surpassed the Zacks Consensus Estimate of $1.07. The bottom line surged 64.6% from the third-quarter 2020 figure, aided by higher revenues. Total revenues of $1,642.4 million outperformed the Zacks Consensus Estimate of $1,546.5 million. The top line jumped 35.7% year over year, driven mainly by the huge increase in revenues in the Logistics segment.

Total operating expenses (on a reported basis) surged 31.4% year over year to $1.37 billion. This increase was mainly due to the 39.8% escalation in fuel expenses as oil price moves north. Knight-Swift’s adjusted operating income rose 54.6% year over year.

Segmental Results

Revenues in the Truckload segment totaled (excluding fuel surcharge and inter-segment transactions) $933.21 million, up 3.4% year over year. Results were driven by a 6.8% increase in average revenue per tractor. Average revenue per tractor was strong in the quarter owing to a 24.9% increase in revenue per loaded mile (excluding fuel surcharge and intersegment transactions). Adjusted segmental operating income rose 22.3% to $206.8 million. Adjusted operating ratio (operating expenses as a percentage of revenues) improved 350 basis points to 77.8%.

Revenues in the Logistics segment (excluding inter-segment transactions) amounted to $221.37 million, up more than 100% year over year owing to the 60.3% increase in load count and a 43.1% rise in revenue per load. Adjusted operating ratio improved to 87.6% in the second quarter from 97.4% in the year-ago period. Segmental adjusted operating income surged more than 100% to $27.46 million.

Revenues in the Intermodal segment (excluding inter-segment transactions) totaled $112.75 million, up 14.1% year over year. Persistent rail congestion and rail allocations induced a decline in load count but contributed to a 25.9% rise in revenue per load. Segmental adjusted operating ratio improved to 91.5% in the reported quarter from 99.7% in the year-ago quarter.

The Less-Than-Truckload (LTL) segment, which includes the results of ACT, a leading LTL carrier, acquired by Knight-Swift in July 2021, generated revenues (excluding fuel surcharges) worth $167.9 million in the September quarter. Segmental operating ratio (on an adjusted basis) was 87.5%.

Other Details

Knight-Swift exited the third quarter with cash and cash equivalents of $269.69 million compared with $156.70 million at the end of 2020. During the first nine months of 2021, the company returned $53.7 million to its shareholders in the form of share repurchases and $46.9 million as  dividends.

Expecting the favorable conditions to continue, the trucking company raised its earnings per share guidance for 2021. Adjusted earnings per share for the full year are now expected in the $4.50-$4.55 band (previous outlook: $3.90-$4.05). Net capex for 2021 is expected in the $450 million-$470 million range.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 22.89% due to these changes.

VGM Scores

Currently, Knight-Swift has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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. It comes with little surprise Knight-Swift has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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