Knight-Swift’s Q2 Results: A Mixed Bag of Earnings Beat and Revenue Miss

Knight-Swift Transportation Holdings Inc. has released its latest quarterly earnings, presenting a complex picture for investors. The transportation giant managed to surpass analyst projections for profitability but fell just short of revenue expectations for the period.

The company posted adjusted earnings per share (EPS) of $0.35, edging past the consensus forecast of $0.34. Net income reached $34.2 million, which translates to $0.21 per diluted share. While total revenue saw a modest increase of 0.8% to $1.86 billion, it narrowly missed the anticipated $1.87 billion. A significant highlight was the 14.4% improvement in operating income, which climbed to $72.6 million.

Diverging Segment Performance

A deeper look into the company’s operating segments reveals a story of contrasts. The Less-Than-Truckload (LTL) unit reported a substantial 28.4% surge in revenue. However, its adjusted operating income was negatively impacted by costs associated with new start-up activities and ongoing integration efforts.

In a contrasting dynamic, the Truckload segment demonstrated remarkable resilience in profitability. It achieved a striking 87.5% jump in its adjusted operating result, even as it experienced a slight 2.7% dip in revenue when excluding fuel surcharges. The Intermodal division faced more pronounced headwinds, registering a 13.8% decline in revenue.

Broader Industry Context

The latest U.S. Bank Freight Payment Index for the second quarter points toward nascent signs of recovery within the freight sector. The data shows a 2.4% quarter-over-quarter increase in national shipment volumes, alongside a 1.2% rise in expenditures. This marks the first quarterly gain in spending after three consecutive years of decline. Despite this positive sequential movement, year-over-year comparisons remain negative, with shipments down 9.8% and spending lower by 4.9%.

Should investors sell immediately? Or is it worth buying Knight-Swift Transportation?

This environment is characterized by a tightening of capacity across the industry. Several fleets have exited the market, prompting remaining carriers, including Knight-Swift and competitor J.B. Hunt Transport Services, to optimize their networks. Both companies reported a reduction in their average tractor count from the first to the second quarter.

Shifting Institutional Positions

The institutional investment landscape surrounding Knight-Swift shows varied sentiment. Several major funds increased their stakes significantly. American Century Companies Inc. grew its position by 7.2% to 1,330,804 shares, while Dimensional Fund Advisors LP boosted its holdings by 9.1% to 7,629,706 shares. The Vanguard Group Inc. added a further 3.6% to its substantial stake, which now stands at 14,935,845 shares. In a major move, Wellington Management Group LLP acquired an additional 2,867,198 shares as of June 30, bringing its total to 14,033,441 shares. Conversely, Resona Asset Management Co. Ltd. took a decidedly different approach, slashing its exposure by 87.0% in the first quarter.

Analyst Sentiment and Price Targets

The consensus view among seventeen research firms continues to be a “Moderate Buy” recommendation for the company’s shares. The average twelve-month price target from these analysts sits at $53.88. Recent adjustments have been optimistic; Raymond James Financial upgraded its outlook in mid-July, raising its price target from $50.00 to $55.00 and reaffirming a “Strong-Buy” rating. Shortly before that, in early July, Citigroup increased its target price from $53.00 to $54.00.

Valuation and Trading Metrics

Knight-Swift currently commands a market valuation of approximately $6.87 billion. Key trading multiples include a trailing price-to-earnings (P/E) ratio of 41.74 and a price/earnings-to-growth (PEG) ratio of 0.64. From a technical perspective, the stock’s 50-day moving average is near $44.30, while its 200-day moving average is around $45.10. Over the past fifty-two weeks, the share price has fluctuated between a low of $36.69 and a high of $61.51.