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Knight-Swift (KNX) Stock Dips on Q3, Q4 EPS Guidance Cut

Zacks Equity Research

Shares of Knight-Swift Transportation Holdings KNX declined in excess of 2.5% in pre-market trading on Oct 15 following the company’s earnings per share guidance cut not only for third-quarter 2019 but also for the final quarter of the year.

However, this North American truckload (TL) transportation stock recovered some of the lost ground during the course of yesterday’s trading session to close at $35.7, down 0.9% from Oct 14’s closing price.

Delving Deeper

Knight-Swift now expects third-quarter adjusted earnings per share between 47 and 48 cents (earlier expectation was in the 54-57 cents band). Detailed results should be out on Oct 23. The Zacks Consensus Estimate for the metric is currently pegged at 53 cents per share.

The company now projects fourth-quarter adjusted earnings per share between 62 and 65 cents (previous forecast was in the 73-77 cents band). The Zacks Consensus Estimate for the metric currently stands at 70 cents per share.

This Zacks Rank #5 (Strong Sell) company blamed stiff competition in the intermodal space as the primary reason for a trimmed outlook. Consequently, there is massive downward pressure on intermodal volumes and revenue per load. The worse-than-expected freight scenario in North America, mainly due to excess supply of TL capacity, also forced the company to slash earnings expectations.

The aforementioned factors negatively impacted revenues. The top-line contraction apart, costs associated with exiting certain underperforming dedicated contract operations hurt the company’s operating income.

The gloomy freight scenario is highlighted in the latest Cass Freight Shipments Index report, suggesting that North American freight shipments declined for 10 consecutive months starting December 2018. 

Knight-Swift, which expects first-quarter 2020 adjusted earnings per share in the 42-46 cents range, anticipates the below-par freight scenario to improve in the second half of next year owing to rationalization of capacity.

Price Performance

Shares of Knight-Swift have witnessed a disappointing run on the bourse, underperforming its industry over the past three months. The stock has merely inched up 1.8% compared with the industry’s 10.5% increase.

Stocks Worth a Look

Investors interested in the Zacks Transportation sector may consider Heartland Express HTLD, SkyWest SKYW and GOL Linhas GOL, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Heartland Express, SkyWest and GOL Linhas have rallied more than 18%, 27% and 25%, respectively, so far this year.

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