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Knight-Swift (KNX) Q1 Earnings Beat, Revenues Miss Mark

Zacks Equity Research

Knight-Swift Transportation Holdings Inc.’s KNX first-quarter 2019 adjusted earnings of 55 cents per share outpaced the Zacks Consensus Estimate of 52 cents. Moreover, the bottom line improved 25% on a year-over-year basis. Lower costs aided the bottom line.

Total revenues of $1,205 million lagged the consensus mark of $1,282 million. Also, the top line deteriorated 5.2% on a year-over-year basis. This decrease was primarily due to a fall in the trucking segment revenues.

Notably, effective tax rate came in at 24% in the quarter under review compared with 21.2% in the first quarter of 2018. For the full year, the same (before discrete items) is expected to be in the 25-26% range.

From the first quarter of 2019 onward, the company started reporting under three segments — Trucking, Logistics and Intermodal— following the realignment of its segments.

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

Revenues in the Trucking segment totaled (excluding fuel surcharge and intersegment transactions) $865.63 million, down 4.7% year over year. Results were hampered by 8.7% decrease in miles per tractor and a 3.6% decline in average tractor count. Adjusted segmental operating income increased 15% to $115.52 million. However, adjusted operating ratio (operating expenses as a percentage of revenues) improved 220 basis points (bps) to 86.7% in the quarter under discussion. Notably, lower value of this key metric bodes well for the company.

Revenues in the Logistics segment (before intersegment transactions) amounted to $87.19 million, up 1.3% year over year owing to a 6.2% rise in brokerage revenues. While adjusted operating ratio improved 380 bps to 91.8%, segmental operating income soared 84% to $7.28 million.

Revenues in the Intermodal segment (excluding intersegment transactions) totaled $115.68 million, up 5% year over year. Segmental adjusted operating ratio came in at 98%, deteriorating 160 bps year over year while operating income plunged 40.2% to $2.36 million. This downside was due to rough weather conditions that affected rail lanes apart from slower rail transit times and a rise in costs.

Operating Results

Total operating expenses decreased 7.6% year over year to $1,088.24 million. Adjusted operating ratio (defined as operating expenses as a percentage of revenues) improved to 88.4% from 90.9% in the year-ago quarter. On the back of efficient cost-control methods and enhanced safety results, Knight-Swift’s adjusted operating income jumped 21.8% year over year to $126.99 million.

Liquidity

This Zacks Rank #3 (Hold) company exited the first quarter with cash and cash equivalents of $60.22 million compared with $82.49 million at the end of 2018. Long-term debt (less current portion) amounted to $364.65 million compared with $364.59 million in December 2018. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Outlook

Knight-Swift expects adjusted earnings per share (EPS) in the range of 62-64 cents (previous view: 62-66 cents) in the second quarter, the mid-point of which is 63 cents, above the Zacks Consensus Estimate of 62 cents. For the third quarter, adjusted earnings per share are expected between 62 cents and 66 cents. The Zacks Consensus Estimate of 66 cents for the same lies above the mid-point of 64 cents. Additionally, capital expenditures for the full year are anticipated in the $550-$575 million range.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting first-quarter earnings reports from key players, namely Expeditors International of Washington, Inc. EXPD, C.H. Robinson Worldwide, Inc. CHRW and Air Lease Corporation AL. While C.H. Robinson will report first-quarter earnings on Apr 30, Expeditors and Air Lease will announce the same on May 7 and May 9, respectively.

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