Here's Why You Should Avoid Knight-Swift (KNX) Stock Now
Knight-Swift Transportation Holdings Inc.KNX is mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.
Softness pertaining to freight demand hurt Knight-Swift’s second-quarter 2023 results. As a result, in the June quarter, Knight-Swift reported lower-than-expected earnings per share (EPS) and revenues. Management also lowered the EPS guidance in the range of $2.10-$2.30 (earlier view: $3.35-$3.55) for 2023. The updated adjusted EPS guidance includes a U.S. Xpress loss of 25-30 cents.
High costs related to driver wages, equipment, maintenance, fuel and other expenses continue to weigh on the bottom line. KNX now expects capital expenditures for 2023 in the $700-$750 million band (prior view: $640-$690 million), which now includes U.S. Xpress. Raised capital expenditure guidance looks disappointing as it might weigh on the company’s bottom line.
Partly due to these headwinds, shares of Knight-Swift have declined 5% so far this year against the 28% rise of the industry it belongs to.
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Despite such tailwinds, KNX’s consistent efforts to reward its shareholders via dividends and share buybacks are encouraging. 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 generation supports shareholder-friendly activities. Free cash flow during the first half of 2023 was $303.08 million.
Zacks Rank and Stocks to Consider
Currently, Knight-Swift carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks from the Zacks Transportation sector are GATX Corporation (GATX), Westinghouse Air Brake Technologies Corporation, operating as Wabtec Corporation (WAB) and SkyWest, Inc. (SKYW). Each of these companies presently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GATX has an expected earnings growth rate of 14.33% for the current year. GATX delivered a trailing four-quarter earnings surprise of 17.30%, on average.
The Zacks Consensus Estimate for GATX’s current-year earnings has improved 2.1% over the past 90 days. Shares of GATX have gained 6% year to date.
Wabtec has an expected earnings growth rate of 16.87% for the current year. WAB delivered a trailing four-quarter earnings surprise of 3.42%, on average.
The Zacks Consensus Estimate for WAB’s current-year earnings has improved 4.9% over the past 90 days. Shares of WAB have gained 5.9% year to date.
SkyWest's fleet-modernization efforts are commendable.A fall in operating expenses is a tailwind for SkyWest. In second-quarter 2023, the metric dipped 2.4% to $693.8 million due to a decline in operating costs. Low operating expenses boost bottom-line results. Shares of SKYW have surged 163.6% year to date.
SKYW delivered a trailing four-quarter earnings surprise of 31.51%, on average.
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Knight-Swift Transportation Holdings Inc. (KNX) : Free Stock Analysis Report
SkyWest, Inc. (SKYW) : Free Stock Analysis Report
Westinghouse Air Brake Technologies Corporation (WAB) : Free Stock Analysis Report
GATX Corporation (GATX) : Free Stock Analysis Report
