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Knight-Swift (KNX) Beats on Q3 Earnings, Raises Q4 EPS View

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Knight-Swift (KNX) Beats on Q3 Earnings, Raises Q4 EPS View

Knight-Swift's (KNX) Q3 benefits from revenue growth owing to the Abilene Motor Express buyout and the Knight and Swift merger. Simultaneously, the company lifts its fourth-quarter earnings outlook.

Knight-Swift Transportation Holdings Inc. KNX delivered better-than-expected earnings as well as revenues in the third quarter of 2018. The company’s earnings (excluding 5 cents from non-recurring items) of 65 cents beat the Zacks Consensus Estimate of 58 cents. Moreover, the bottom line surged more than 100% year over year.

Total revenues also soared more than 100% year over year to $1,346.6 million and surpassed the Zacks Consensus Estimate of $1,340.7 million. The Abilene Motor Express acquisition in March as well as the Knight and Swift merger contributed to the top-line rise.

The earnings and revenue beat as well as the year-over-year improvements pleased investors. Consequently, the stock gained 1.7% at the close of business on Oct 24.

Operating expenses came in at $1.2 billion in the quarter under review.

Ever since the merger of Knight and Swift on Sep 8, 2017, the combined establishment has been reporting under six segments, namely Knight Trucking, Knight Logistics, Swift Truckload, Swift Dedicated, Swift Refrigerated and Swift Intermodal.

Knight-Swift Transportation Holdings Inc. Price, Consensus and EPS Surprise

 

Knight-Swift Transportation Holdings Inc. Price, Consensus and EPS Surprise | Knight-Swift Transportation Holdings Inc. Quote


Segmental Results

Knight Transportation

The Knight Trucking segment grossed revenues (excluding fuel surcharge and intersegment transactions) of $256.5 million, up 31% year over year. This upside was driven by increases in both contract and non-contract rates on the back of an upbeat freight market and tight capacity as well as a 7.2% increase in average tractor count. Segmental operating income (adjusted) skyrocketed more than 100% to $56.89 million while adjusted operating ratio (operating expenses as a percentage of revenues) improved 810 basis points (bps) to 77.8% in the quarter under consideration.

Knight logistics segment reported revenues (before intersegment transactions) of $87.92 million, up 55.4% year over year owing to a 60.6% rise in brokerage revenues. Segmental operating income jumped more than 100% to $8.82 million while adjusted operating ratio improved 350 bps to 90%.

Swift Transportation

Swift Truckload generated revenues (before fuel surcharge) of $347.46 million. While the Swift Dedicated, Swift Refrigerated and Swift Intermodal segments logged revenues of $144.37 million, $187.98 million and $103.8 million, respectively. Segmental adjusted operating ratio came in at 84.5%, 84.9%, 95.6% and 90.9%, each in Swift Truckload, Swift Dedicated, Swift Refrigerated and Swift Intermodal.

The company has been able to stabilize the Swift consolidated tractor fleet, ending the third quarter with 14,779 operational tractors compared with 14,753 in the second quarter.

Liquidity

As of Sep 30, 2018, this Zacks Rank #4 (Sell) company had cash and cash equivalents of $91.34 million compared with $76.65 million at 2017 end. Long-term debt (less current portion) totaled $364.53 million in the third quarter compared with $364.77 million as of Dec 31, 2017.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Outlook

For the fourth quarter of 2018, the company anticipates adjusted earnings per share to be in the range of 71-75 cents, higher than the previous expectation of 68-72 cents. The Zacks Consensus Estimate for fourth-quarter earnings stands at 71 cents.

For the full year, Knight-Swift expects capital expenditures in the $500-$550 million band, primarily comprising replacements of existing tractors and trailers. Previously, it estimated the same in the range of $525-$575 million. Additionally, the company projects a normalized tax rate of approximately 25% for the remaining year.

Meanwhile, the company predicts adjusted earnings per share of 50-54 cents during the first quarter of 2019.

Upcoming Releases

Investors interested in the broader Zacks Transportation sector are keenly awaiting third-quarter earnings reports from key players, namely SkyWest, Inc. SKYW, C.H. Robinson Worldwide, Inc. CHRW and Triton International Limited TRTN. While SkyWest and C.H. Robinson will report third-quarter earnings on Oct 30, Triton International will release the same on Nov 2.

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