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Raised Guidance Boosts Knight-Swift (KNX) Amid High Cost
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We have recently updated a report on Knight-Swift Transportation Holdings Inc. (KNX - Free Report) .
The long-term expected earnings per share (three to five years) growth rate for Knight-Swift is pegged at 15%. Knight-Swift has an earnings surprise of 14%, on average, beating estimates in all of the last four quarters. The stock has gained 38.2% in the past year compared with a 52.8% rally of the industry .
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Knight-Swift’s improvement in adjusted operating ratio is very encouraging. The adjusted operating ratio improved to 82.8% in the first nine months of 2021 compared with 86.6% reported in the first nine months of 2020. In third-quarter 2021, the metric improved to 81.3% from 83.9% a year ago. The uptick was primarily driven by an increase in revenues in the Trucking, Logistics and Intermodal segments. Lower the value of the metric, the better. We are encouraged by management's decision to increase the current-year earnings per share (EPS) guidance. It now expects EPS in the band of $4.50-$4.55 (previous expectation: $3.90-$4.05) for 2021. Knight-Swift raised the guidance as it expects the strong freight conditions to continue in the current year driven by inventory restocking and upbeat demand.
High operating costs are limiting the bottom line. During the first nine months of 2021, the company’s total operating expenses increased 17.1% from the year-ago period’s reported figure. An increase in fuel costs (up 24.8% in the first nine months of 2021) is contributing to the escalation in operating expenses. With oil prices continuing to move up, fuel costs are likely to be high in fourth-quarter 2021 as well.
The long-term expected EPS (three to five years) growth rate for J.B. Hunt is pegged at 15%. JBHT is benefiting from strong performances across all its segments. While the Dedicated Contract Services (DCS) unit is being aided by fleet-productivity improvement and a rise in average revenue-producing trucks, the Integrated Capacity Solutions (ICS) unit is gaining from favorable customer freight mix as well as higher contractual and spot rates.
JBHT’s measures to reward shareholders are encouraging. Driven by the tailwinds, the stock has increased 41.7% in the past year. J.B. Hunt currently carries a Zacks Rank #2 (Buy).
The long-term expected EPS (three to five years) growth rate for Landstar is pegged at 12%. LSTR is benefitting from a gradual recovery in the economy and freight market conditions in the United States.
LSTR’s top and the bottom line increased substantially in each quarter from third-quarter 2020, owing to robust revenues in the primary segment — truck transportation. LSTR has surged 25.3% in the past year. Landstar sports a Zacks Rank #1.
The long-term expected EPS (three to five years) growth rate for C.H. Robinson is pegged at 9%. CHRW benefits from higher pricing and volumes across most of its service lines. Total revenues surged 42.4% year over year in the first nine months of 2021, with higher revenues across all the segments.
CHRW’s measures to reward its shareholders are encouraging. Driven by the tailwinds, the stock has moved up 7% in the past year. C.H. Robinson currently sports a Zacks Rank #1.
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Raised Guidance Boosts Knight-Swift (KNX) Amid High Cost
We have recently updated a report on Knight-Swift Transportation Holdings Inc. (KNX - Free Report) .
The long-term expected earnings per share (three to five years) growth rate for Knight-Swift is pegged at 15%. Knight-Swift has an earnings surprise of 14%, on average, beating estimates in all of the last four quarters. The stock has gained 38.2% in the past year compared with a 52.8% rally of the industry .
Knight-Swift’s improvement in adjusted operating ratio is very encouraging. The adjusted operating ratio improved to 82.8% in the first nine months of 2021 compared with 86.6% reported in the first nine months of 2020. In third-quarter 2021, the metric improved to 81.3% from 83.9% a year ago. The uptick was primarily driven by an increase in revenues in the Trucking, Logistics and Intermodal segments. Lower the value of the metric, the better.
We are encouraged by management's decision to increase the current-year earnings per share (EPS) guidance. It now expects EPS in the band of $4.50-$4.55 (previous expectation: $3.90-$4.05) for 2021. Knight-Swift raised the guidance as it expects the strong freight conditions to continue in the current year driven by inventory restocking and upbeat demand.
High operating costs are limiting the bottom line. During the first nine months of 2021, the company’s total operating expenses increased 17.1% from the year-ago period’s reported figure. An increase in fuel costs (up 24.8% in the first nine months of 2021) is contributing to the escalation in operating expenses. With oil prices continuing to move up, fuel costs are likely to be high in fourth-quarter 2021 as well.
Zacks Rank & Stocks to Consider
Knight-Swift currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Some better-ranked stocks in the broader Zacks Transportation sector are J.B. Hunt Transport Services, Inc. (JBHT - Free Report) , Landstar System, Inc. (LSTR - Free Report) and C.H. Robinson Worldwide, Inc. (CHRW - Free Report) .
The long-term expected EPS (three to five years) growth rate for J.B. Hunt is pegged at 15%. JBHT is benefiting from strong performances across all its segments. While the Dedicated Contract Services (DCS) unit is being aided by fleet-productivity improvement and a rise in average revenue-producing trucks, the Integrated Capacity Solutions (ICS) unit is gaining from favorable customer freight mix as well as higher contractual and spot rates.
JBHT’s measures to reward shareholders are encouraging. Driven by the tailwinds, the stock has increased 41.7% in the past year. J.B. Hunt currently carries a Zacks Rank #2 (Buy).
The long-term expected EPS (three to five years) growth rate for Landstar is pegged at 12%. LSTR is benefitting from a gradual recovery in the economy and freight market conditions in the United States.
LSTR’s top and the bottom line increased substantially in each quarter from third-quarter 2020, owing to robust revenues in the primary segment — truck transportation. LSTR has surged 25.3% in the past year. Landstar sports a Zacks Rank #1.
The long-term expected EPS (three to five years) growth rate for C.H. Robinson is pegged at 9%. CHRW benefits from higher pricing and volumes across most of its service lines. Total revenues surged 42.4% year over year in the first nine months of 2021, with higher revenues across all the segments.
CHRW’s measures to reward its shareholders are encouraging. Driven by the tailwinds, the stock has moved up 7% in the past year. C.H. Robinson currently sports a Zacks Rank #1.