Knight-Swift Transportation Holdings Inc. (KNX Quick QuoteKNX - Free Report) shares have moved up 5.8% in the past three months compared with the industry’s 3.3% rise.

Image Source: Zacks Investment Research

Reasons for Upside

We are encouraged by management's decision to increase the current-year earnings per share (EPS) guidance. It now expects EPS in the band of $3.90-$4.05 (previous expectation: $3.45-$3.60) for 2021. The midpoint ($3.97) of the guidance is in line with the Zacks Consensus Estimate. Knight-Swift raised the guidance as it expects the strong freight conditions to continue in the current year driven by inventory restocking and upbeat demand. The company also expects over-the-road contract rates to increase in mid-teens. Strong revenue growth in the logistics and intermodal segment is expected to continue in 2021.  

Improvement in adjusted operating ratio is very encouraging. In second-quarter 2021, adjusted operating ratio improved to 83.1% from 87.6% in the year-ago quarter. This uptick was primarily driven by increase in revenues in the Trucking, Logistics and Intermodal segments. Lower the value of the metric, the better.

Favorable Estimate Revisions

Driven by the above tailwinds, the Zacks Consensus Estimate for current-year earnings has increased 11.8% per share in the past 60 days.

Zacks Rank & Other Stocks to Consider

Knight-Swift currently carries a Zacks Rank #2 (Buy).

Investors interested in the broader Zacks Transportation sector can also consider stocks like Union Pacific Corporation (UNP Quick QuoteUNP - Free Report) , Landstar System, Inc. (LSTR Quick QuoteLSTR - Free Report) and Herc Holdings Inc. (HRI Quick QuoteHRI - Free Report) . Union Pacific and Landstar carry a Zacks Rank #2, while Herc Holdings sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected earnings per share (three to five years) growth rate for Union Pacific, Landstar and Herc Holdings is pegged at 10%, 12% and 49.2%, respectively.