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Knight-Swift (KNX) Q2 Earnings Meet Estimates, Revenues Top

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Knight-Swift Transportation Holdings Inc. KNX reported earnings per share (excluding 5 cents from non-recurring items) of 56 cents, in line with the Zacks Consensus Estimate.  Meanwhile, the bottom line improved substantially from the year-ago figure.

Higher revenues and a low tax rate from the Tax Cuts and Jobs Act aided the bottom line. Notably, effective tax rate reduced to 22.9% in the reported quarter compared with 37.6% in the prior-year period.

Operating Results

Total revenues also increased year over year to $1,331.7 million and beat the Zacks Consensus Estimate of $1,325.7 million. The top line was boosted by higher revenues at the Knight Trucking and logistics segments. The Abilene Motor Express acquisition in March as well as the Knight and Swift merger also contributed to the top-line rise.

Operating expenses came in at $1.21 billion in the quarter under review.

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

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.

Segmental Results

Knight Transportation

The Knight Trucking segment grossed revenues (excluding fuel surcharge and intersegment transactions) of $255.22 million, up 31.5% 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. Segmental operating income (adjusted) skyrocketed 90.1% to $56.93 million while adjusted operating ratio (operating expenses as a percentage of revenues) improved 690 basis points (bps) to 77.7% in the quarter under consideration.

Knight logistics segment reported revenues (before intersegment transactions) of $76.64 million, up 44.7% year over year owing to 45.4% increase in brokerage revenues. Segmental operating income jumped 55.1% to $4.11 million while adjusted operating ratio improved 40 bps to 94.6%.

Swift Transportation

Swift Truckload generated revenues (before fuel surcharge) of $363.07 million. While the Swift Dedicated, Swift Refrigerated and Swift Intermodal segments logged revenues of $142 million, $180.83 million and $94.73 million, respectively. Segmental adjusted operating ratio came in at 89.1%, 87.1%, 98.2% and 96.3%, each in Swift Truckload, Swift Dedicated, Swift Refrigerated and Swift Intermodal.

The company continues to struggle with acute driver crisis resulting in low truck count. During the second quarter, Swift’s tractor count fell by 658 compared with the tally in the first quarter of 2018. The challenging situation pertaining to driver-sourcing was the prime reason behind this downside.

Liquidity & Outlook

As of Jun 30, 2018, this Zacks Rank #2 (Buy) company had cash and cash equivalents of $115.49 million compared with $76.65 million at 2017 end.  Long-term debt (less current portion) totaled $364.47 million in the second quarter compared with $364.78 million as of Dec 31, 2017. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company continues to expect capital expenditures in the $525-$575 million band for 2018, primarily comprising replacements of existing tractors and trailers.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting second-quarter earnings reports from key players, namely C.H. Robinson Worldwide, Inc. CHRW, Expeditors International of Washington, Inc. EXPD and Genesee & Wyoming, Inc. GWR. While Genesee & Wyoming will report second-quarter earnings on Jul 27, C.H. Robinson and Expeditors will announce the same on Jul 31 and Aug 7, respectively.

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