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Here's Why You Should Hold Knight-Swift (KNX) in Portfolio Now
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Knight-Swift Transportation Holdings Inc. (KNX - Free Report) is currently benefiting from its deal to acquire U.S. Xpress Enterprises and solid investor-friendly steps. However, low freight demand is a headwind.
Factors Favoring KNX
We are impressed by KNX’s efforts to boost shareholders’ value through dividends and buybacks. In February 2023, the company’s board approved a 16.67% hike in quarterly cash dividend to 14 cents per share (annually 56 cents).
Its free cash flow generating ability supports shareholder-friendly activities. Free cash flow generated during 2022 was $818.71 million. In 2022, KNX returned $300 million to shareholders in form of share repurchases and $78.3 million as dividends. Free cash flow generated during first-quarter 2023 amounted to $144.2 million.
In March 2023, Knight-Swift inked a deal to acquire U.S. Xpress Enterprises. The total enterprise value of this deal, excluding transaction costs, is approximately $808 million. The transaction, unanimously approved by the board of directors of Knight-Swift and a Special Committee of the independent directors of U.S. Xpress’ board, is anticipated to close in early third-quarter 2023.
The deal, following closure, is likely to be accretive to Knight-Swift’s adjusted earnings per share from 2024. Management is targeting an adjusted operating ratio (operating expenses as a percentage of revenues) in high 80s by 2026 apart from generating mid-teens return on invested capital for the consolidated U.S. Xpress business unit.
Shares of KNX have gained 13.8% in the past year compared with 26.9% growth of the industry it belongs to.
Image Source: Zacks Investment Research
Key Risks
Due to weakness pertaining to freight demand, Knight-Swift reported lower-than-expected earnings per share and revenues in first-quarter 2023. CEO David Jackson said that the unusually soft demand experienced in the final quarter of 2022 continued through the first quarter of 2023, with the demand decline being sharper-than-expected.
Due to low freight demand, management lowered the earnings per share guidance for full-year 2023.
Zacks Rank
KNX currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings, S.A. (CPA - Free Report) and Allegiant Travel Company (ALGT - Free Report) .
Copa Holdings, which presently flaunts a Zacks Rank #1 (Strong Buy), is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive. You can see the complete list of today’s Zacks #1 Rank stocks here.
For second-quarter and full-year 2023, CPA’s earnings are expected to register 919% and 89% surge, respectively, on a year-over-year basis.
Allegiant, which currently carries a Zacks Rank #2 (Buy), is seeing a steady recovery in air-travel demand. In first-quarter 2023, operating revenues grew 29.9% on a year-over-year basis.
ALGT has a strong liquidity position. Cash and cash equivalents of $317.6 million at first-quarter 2023 end was higher than the current debt of $289.7 million. This implies that the company has enough cash to meet its debt burden.
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Here's Why You Should Hold Knight-Swift (KNX) in Portfolio Now
Knight-Swift Transportation Holdings Inc. (KNX - Free Report) is currently benefiting from its deal to acquire U.S. Xpress Enterprises and solid investor-friendly steps. However, low freight demand is a headwind.
Factors Favoring KNX
We are impressed by KNX’s efforts to boost shareholders’ value through dividends and buybacks. In February 2023, the company’s board approved a 16.67% hike in quarterly cash dividend to 14 cents per share (annually 56 cents).
Its free cash flow generating ability supports shareholder-friendly activities. Free cash flow generated during 2022 was $818.71 million. In 2022, KNX returned $300 million to shareholders in form of share repurchases and $78.3 million as dividends. Free cash flow generated during first-quarter 2023 amounted to $144.2 million.
In March 2023, Knight-Swift inked a deal to acquire U.S. Xpress Enterprises. The total enterprise value of this deal, excluding transaction costs, is approximately $808 million. The transaction, unanimously approved by the board of directors of Knight-Swift and a Special Committee of the independent directors of U.S. Xpress’ board, is anticipated to close in early third-quarter 2023.
The deal, following closure, is likely to be accretive to Knight-Swift’s adjusted earnings per share from 2024. Management is targeting an adjusted operating ratio (operating expenses as a percentage of revenues) in high 80s by 2026 apart from generating mid-teens return on invested capital for the consolidated U.S. Xpress business unit.
Shares of KNX have gained 13.8% in the past year compared with 26.9% growth of the industry it belongs to.
Image Source: Zacks Investment Research
Key Risks
Due to weakness pertaining to freight demand, Knight-Swift reported lower-than-expected earnings per share and revenues in first-quarter 2023. CEO David Jackson said that the unusually soft demand experienced in the final quarter of 2022 continued through the first quarter of 2023, with the demand decline being sharper-than-expected.
Due to low freight demand, management lowered the earnings per share guidance for full-year 2023.
Zacks Rank
KNX currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings, S.A. (CPA - Free Report) and Allegiant Travel Company (ALGT - Free Report) .
Copa Holdings, which presently flaunts a Zacks Rank #1 (Strong Buy), is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive. You can see the complete list of today’s Zacks #1 Rank stocks here.
For second-quarter and full-year 2023, CPA’s earnings are expected to register 919% and 89% surge, respectively, on a year-over-year basis.
Allegiant, which currently carries a Zacks Rank #2 (Buy), is seeing a steady recovery in air-travel demand. In first-quarter 2023, operating revenues grew 29.9% on a year-over-year basis.
ALGT has a strong liquidity position. Cash and cash equivalents of $317.6 million at first-quarter 2023 end was higher than the current debt of $289.7 million. This implies that the company has enough cash to meet its debt burden.