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Knight-Swift (KNX) Up 1.4% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Knight-Swift Transportation Holdings (KNX - Free Report) . Shares have added about 1.4% 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 drivers.
Second- Quarter Earnings
Knight-Swift Transportation reported earnings per share (excluding 5 cents from non-recurring items) of 56 cents, in line with the Zacks Consensus Estimate. Meanwhile, the bottom line improved substantially from the year-ago figure. Higher revenues and a low tax rate from the Tax Cuts and Jobs Act aided the bottom line. Notably, effective tax rate reduced to 22.9% in the reported quarter compared with 37.6% in the prior-year period.
Operating Results
Total revenues also increased year over year to $1,331.7 million and beat the Zacks Consensus Estimate of $1,325.7 million. The top line was boosted by higher revenues at the Knight Trucking and logistics segments. The Abilene Motor Express acquisition in March as well as the Knight and Swift merger also contributed to the top-line rise.
Operating expenses came in at $1.21 billion in the quarter under review.
Segmental Results
Knight Transportation
The Knight Trucking segment grossed revenues (excluding fuel surcharge and intersegment transactions) of $255.22 million, up 31.5% year over year. This upside was driven by increases in both contract and non-contract rates on the back of an upbeat freight market and tight capacity. Segmental operating income (adjusted) skyrocketed 90.1% to $56.93 million while adjusted operating ratio (operating expenses as a percentage of revenues) improved 690 basis points (bps) to 77.7% in the quarter under consideration.
Knight logistics segment reported revenues (before intersegment transactions) of $76.64 million, up 44.7% year over year owing to 45.4% increase in brokerage revenues. Segmental operating income jumped 55.1% to $4.11 million while adjusted operating ratio improved 40 bps to 94.6%.
Swift Transportation
Swift Truckload generated revenues (before fuel surcharge) of $363.07 million. While the Swift Dedicated, Swift Refrigerated and Swift Intermodal segments logged revenues of $142 million, $180.83 million and $94.73 million, respectively. Segmental adjusted operating ratio came in at 89.1%, 87.1%, 98.2% and 96.3%, each in Swift Truckload, Swift Dedicated, Swift Refrigerated and Swift Intermodal.
The company continues to struggle with acute driver crisis resulting in low truck count. During the second quarter, Swift’s tractor count fell by 658 compared with the tally in the first quarter of 2018. The challenging situation pertaining to driver-sourcing was the prime reason behind this downside.
Liquidity & Outlook
As of Jun 30, 2018, the company had cash and cash equivalents of $115.49 million compared with $76.65 million at 2017 end. Long-term debt (less current portion) totaled $364.47 million in the second quarter compared with $364.78 million as of Dec 31, 2017.
The company continues to expect capital expenditures in the $525-$575 million band for 2018, primarily comprising replacements of existing tractors and trailers. Adjusted earnings per share is expected between 56 cents and 60 cents in the third quarter of 2018. The same is anticipated between 68 cents and 72 cents in the fourth quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Knight-Swift has an average Growth Score of C, however its Momentum is doing a bit better with a B. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is equally suitable for value and momentum investors while growth investors may want to look elsewhere.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Knight-Swift has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Knight-Swift (KNX) Up 1.4% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Knight-Swift Transportation Holdings (KNX - Free Report) . Shares have added about 1.4% 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 drivers.
Second- Quarter Earnings
Knight-Swift Transportation reported earnings per share (excluding 5 cents from non-recurring items) of 56 cents, in line with the Zacks Consensus Estimate. Meanwhile, the bottom line improved substantially from the year-ago figure. Higher revenues and a low tax rate from the Tax Cuts and Jobs Act aided the bottom line. Notably, effective tax rate reduced to 22.9% in the reported quarter compared with 37.6% in the prior-year period.
Operating Results
Total revenues also increased year over year to $1,331.7 million and beat the Zacks Consensus Estimate of $1,325.7 million. The top line was boosted by higher revenues at the Knight Trucking and logistics segments. The Abilene Motor Express acquisition in March as well as the Knight and Swift merger also contributed to the top-line rise.
Operating expenses came in at $1.21 billion in the quarter under review.
Segmental Results
Knight Transportation
The Knight Trucking segment grossed revenues (excluding fuel surcharge and intersegment transactions) of $255.22 million, up 31.5% year over year. This upside was driven by increases in both contract and non-contract rates on the back of an upbeat freight market and tight capacity. Segmental operating income (adjusted) skyrocketed 90.1% to $56.93 million while adjusted operating ratio (operating expenses as a percentage of revenues) improved 690 basis points (bps) to 77.7% in the quarter under consideration.
Knight logistics segment reported revenues (before intersegment transactions) of $76.64 million, up 44.7% year over year owing to 45.4% increase in brokerage revenues. Segmental operating income jumped 55.1% to $4.11 million while adjusted operating ratio improved 40 bps to 94.6%.
Swift Transportation
Swift Truckload generated revenues (before fuel surcharge) of $363.07 million. While the Swift Dedicated, Swift Refrigerated and Swift Intermodal segments logged revenues of $142 million, $180.83 million and $94.73 million, respectively. Segmental adjusted operating ratio came in at 89.1%, 87.1%, 98.2% and 96.3%, each in Swift Truckload, Swift Dedicated, Swift Refrigerated and Swift Intermodal.
The company continues to struggle with acute driver crisis resulting in low truck count. During the second quarter, Swift’s tractor count fell by 658 compared with the tally in the first quarter of 2018. The challenging situation pertaining to driver-sourcing was the prime reason behind this downside.
Liquidity & Outlook
As of Jun 30, 2018, the company had cash and cash equivalents of $115.49 million compared with $76.65 million at 2017 end. Long-term debt (less current portion) totaled $364.47 million in the second quarter compared with $364.78 million as of Dec 31, 2017.
The company continues to expect capital expenditures in the $525-$575 million band for 2018, primarily comprising replacements of existing tractors and trailers. Adjusted earnings per share is expected between 56 cents and 60 cents in the third quarter of 2018. The same is anticipated between 68 cents and 72 cents in the fourth quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Knight-Swift has an average Growth Score of C, however its Momentum is doing a bit better with a B. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is equally suitable for value and momentum investors while growth investors may want to look elsewhere.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Knight-Swift has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.