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U.S. trucker Knight-Swift sees higher freight rates in 2018

(Adds CEO comments, background, share price)

By Eric M. Johnson

Jan 30 (Reuters) - Trucking company Knight-Swift Transportation Holdings Inc said on Tuesday it expected higher contract rates for the freight it carries this year, warning that the worst-ever market for hiring new drivers would likely restrain capacity.

Recruiting and retaining truck drivers has been a lingering problem for U.S. trucking companies as they compete for qualified ones at a time of low unemployment, while striving to keep pay, a huge expense, as low as possible.

"Given the strength in the freight market and the inflationary pressures the industry is experiencing in driver wages, we expect to see rate increases in our contract business in the high single digits to low double digits throughout 2018," Chief Executive Dave Jackson told analysts on a post-earnings conference call.

The Phoenix, Arizona-based company posted a better-than-expected quarterly profit boosted by recent changes to U.S. tax law and improving freight demand, but missed expectations on revenue. The results include a $364.2 million income tax benefit from the tax changes.

Shares of Knight-Swift, which have risen about 13 percent over the last 60 trading days, jumped 8 percent to $49 after closing 2.9 percent lower on Tuesday.

Driver wages were up 6-7 percent in the quarter, Jackson said, noting "some pent-up wage pressure" after two years of small or no pay bumps.

The driver shortage remains a challenge for the industry and will likely hurt the ability to increase capacity, he added.

Jackson also said capacity for third-party carriers has tightened due to a U.S. regulation that trucking companies use electronic logging devices to track the number of hours drivers are behind the wheel.

Knight-Swift plans net capital expenditures of $525 million to $575 million for 2018 as the company moves away from leasing equipment.

The company also said it was on track to achieve synergy goals of $150 million by 2019. Last year, Swift Transportation Co and Knight Transportation Holdings Inc merged in a stock-swap deal that created a company with a current market value of more than $8.31 billion. (Reporting by Eric M. Johnson in Seattle; Editing by Richard Chang)