Why Is Knight-Swift (KNX) Up 15.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Knight-Swift Transportation Holdings (KNX). Shares have added about 15.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Knight-Swift due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Earnings Miss in Q3
Knight-Swift reported mixed third-quarter 2022 results wherein earnings lagged the Zacks Consensus Estimate, and revenues beat the same.
Quarterly earnings (excluding 6 cents from non-recurring items) of $1.27 per share missed the Zacks Consensus Estimate of $1.33 and fell 2.3% year over year. The bottom line was unfavorably impacted by higher interest expenses, higher tax rates and lower gains on sales.
Total revenues of $1,896.8 million outperformed the Zacks Consensus Estimate of $1,864.7 million. The top line jumped 15.5% year over year.
Total operating expenses (on a reported basis) increased 18.9% year over year to $1.63 billion. Knight-Swift’s adjusted operating income fell 1.4% year over year.
Revenues (excluding fuel surcharge and inter-segment transactions) in the Truckload segment totaled $967.76 million, up 3.7% year over year. Results were driven by a 1.8% increase in average revenue per tractor. Adjusted segmental operating income fell 14.9% to $176.13 million. Adjusted operating ratio (operating expenses as a percentage of revenues) grew 400 basis points (bps) to 81.8%.
The Less-Than-Truckload (LTL) segment, which includes the results of AAA Cooper Transportation, a leading LTL carrier acquired by Knight-Swift in July 2021, generated revenues (excluding fuel surcharges) worth $224.44 million in the September quarter, up 33.7% year over year. Adjusted segmental operating income grew 66.4% to $34.89 million. Adjusted operating ratio (operating expenses as a percentage of revenues) fell 300 bps to 84.5%.
Revenues in the Logistics segment (excluding inter-segment transactions) amounted to $209.96 million, down 5.2% year over year, owing to the21% decrease in revenue per load. Segmental adjusted operating income increased 1.2% to $27.79 million. Adjusted operating ratio fell80 bps to 86.8%.
Revenues in the Intermodal segment (excluding inter-segment transactions) totaled $130.78 million, up 16% year over year. The segmental operating ratio (on a reported basis) fell to 90.2% in the reported quarter from 91.5% in the year-ago quarter.
Liquidity, Dividends & Buyback
Knight-Swift exited the third quarter with cash and cash equivalents of $194.08 million compared with $198.02 million at the end of June 2022. Additionally, long-term debt (excluding current maturities) of $1.03 billion was flat sequentially.
So far this year, KNX returned $300 million to its shareholders in the form of share repurchases and $59 million as dividends.
For the ongoing year, Knight-Swift now expects adjusted earnings per share in the range of $5.17-$5.22 (previous guidance: $5.30-$5.45). KNX now expects net cash capital expenditures for 2022 in the band of $525 million–$575 million compared with the prior guidance of$550-$600 million. The tax rate is expected to be 25% for 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -9.9% due to these changes.
Currently, Knight-Swift has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Knight-Swift has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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