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Why Knight-Swift Stock Popped 10% This Morning

Rich Smith, The Motley Fool

What happened

Shares of trucker Knight-Swift Transportation (NYSE: KNX) -- the product of the April 2017 merger between Knight Transportation and Swift Transportation -- jolted ahead 10% in early morning trading Thursday before settling back to enjoy an 8.7% rise by close of trading. The reason: This morning, Knight-Swift updated earnings guidance for the fourth and final quarter of fiscal 2018 and for the first couple of quarters of fiscal 2019, as well.

Knight increased pro forma Q4 2018 guidance to a range of from $0.91 to $0.93 per share. Q1 2019 guidance is now for the company to earn between $0.52 and $0.55 per share (also pro forma). And for Q2, the company expects to earn $0.62 to $0.66 per share.

Truck driving into a sunrise

Knight paints a picture of a brighter tomorrow. Image source: Getty Images.

So what

With Knight-Swift giving only pro forma estimates, it's hard to know how comparable any of these numbers are to the company's historical results. In Q4 of 2017 for example, Knight-Swift reported GAAP profits of $2.50 per share, diluted -- and compared to that result, earning only "$0.91 to $0.93" in Q4 2018 would appear to be a disappointment.

On the other hand, data provider S&P Global Market Intelligence clarifies that Knight's "normalized diluted EPS [earnings per share]" in Q4 2017 were actually only $0.46 per share. Compared to that number, Knight's promise of about $0.92 per share in Q4 2018 works out to a 100% improvement!

Now what

What is clear is that Knight-Swift's new guidance numbers for Q4 2018 are about 26% higher than what the company had previously told investors to expect, while even Q1 2019 guidance represents a more modest 3% bump up. (The company's Q2 2019 guidance is entirely new).

Viewed from that perspective, it's clear that Knight is painting a picture of a business on the rise -- and investors are responding with higher bids for Knight-Swift stock.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.