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Why Is Knight-Swift (KNX) Up 7.6% Since Last Earnings Report?

A month has gone by since the last earnings report for Knight-Swift Transportation Holdings (KNX). Shares have added about 7.6% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Earnings Beat in Q2

Knight-Swift’s  second-quarter 2022 earnings (excluding 6 cents from non-recurring items) of $1.41 per share surpassed the Zacks Consensus Estimate of $1.35. The bottom line surged 43.9% from the second quarter of 2021 figure, aided by higher revenues.

Total revenues of $1,961.1 million outperformed the Zacks Consensus Estimate of $1,790 million. The top line jumped 49.1% year over year. Total operating expenses (on a reported basis) surged 45.4% year over year to $1.64 billion. Knight-Swift’s adjusted operating income rose 66.1% year over year.

Segmental Results

Revenues (excluding fuel surcharge and inter-segment transactions) in the Truckload segment totaled $981.48 million, up 11.2% year over year. Results were driven by an 11.1% increase in average revenue per tractor. Adjusted segmental operating income rose 22.4% to $206.6 million. Adjusted operating ratio (operating expenses as a percentage of revenues) declined 200 basis points to 78.9%.

Revenues in the Logistics segment (excluding inter-segment transactions) amounted to $247.32 million, up 52.5% year over year, owing to the 48.2% increase in load count and a 2.9% rise in revenue per load. Segmental adjusted operating income surged more than 200% to $44.1 million. Adjusted operating ratio fell to 82.2% in the second quarter from 91.1% in the year-ago period.

Revenues in the Intermodal segment (excluding inter-segment transactions) totaled $132.85 million, up 15.2% year over year. Segmental operating ratio (on a reported basis) fell to 89.3% in the reported quarter from 95% in the year-ago quarter.

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 $224.18 million in the June quarter. The segment also includes the results of Midwest Motor Express, acquired last December. Segmental operating ratio (on an adjusted basis) was 78.7%.

Liquidity, Dividends & Buybacks

Knight-Swift exited the second quarter with cash and cash equivalents of $198.02 million compared with $242.86 million at the end of March 2022. Additionally, long-term debt (excluding current maturities) of $1.03 billion was flat sequentially.

During the quarter, KNX returned $150 million to its shareholders in the form of share repurchases and $19.6 million as dividends

2022 Guidance

For the ongoing year, Knight-Swift now expects adjusted earnings per share in the range of $5.30-$5.45 (previous guidance: $5.20-$5.40). The Zacks Consensus Estimate of $5.33 billion lies within the updated guidance. KNX continues to expect net cash capital expenditures for 2022 in the band of $550-$600 million. The tax rate is expected to be 25% for 2022.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Knight-Swift has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Knight-Swift has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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