KNX – Knight-Swift (KNX) Up 1.3% 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 1.3% 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 catalysts.

Earnings Beat in Q2

Knight-Swift’s second-quarter 2021 earnings (excluding 6 cents from non-recurring items) of 98 cents per share surpassed the Zacks Consensus Estimate of 87 cents. The bottom line surged 71.9% from the second quarter of 2020, which saw significantly low volumes due to weak freight market conditions caused by the coronavirus pandemic.

Total revenues of $1,315.7 million outperformed the Zacks Consensus Estimate of $1,300.8 million. The top line jumped 24% year over year driven by an increase in revenues in the Trucking, Logistics and Intermodal segments.

Total operating expenses increased 17.3% year over year to $1.12 billion. Adjusted operating ratio (operating expenses as a percentage of revenues) improved to 83.1% from 87.6% in the second quarter of 2020. Lower the value of the metric, the better. Knight-Swift’s adjusted operating income rose 65.1% year over year.

Segmental Result

Revenues in the Trucking segment totaled (excluding fuel surcharge and inter-segment transactions) $882.56 million, up 8.2% year over year. Results were driven by 10.3% increase in average revenue per tractor. Average revenue per tractor was strong in the quarter owing to an18.8% increase in revenue per loaded mile (excluding fuel surcharge and intersegment transactions). Adjusted segmental operating income surged 42.8% to $168.78 million. Adjusted operating ratio (operating expenses as a percentage of revenues) improved 460 basis points to 80.9%.

Revenues in the Logistics segment (excluding inter-segment transactions) amounted to $162.17 million, up more than 100% year over year, due to 55.3% increase in brokerage load volumes and 55.8% (including benefits from the UTXL acquisition) rise in revenue per load. Adjusted operating ratio improved to 91.1% in the second quarter from 95.5% in the year-ago period. Segmental adjusted operating income surged more than 300% to $14.45 million.

Revenues in the Intermodal segment (excluding inter-segment transactions) totaled approximately $115.29 million, up 39.4% year over year as a result of 19.9% and 16.3% increase in load counts and revenue per load, respectively. Segmental adjusted operating ratio improved to 95% in the reported quarter from 105.3% in year-ago quarter. Segmental operating income (adjusted) was $5.81 million in the quarter, against an adjusted operating loss of $4.41 million in the second quarter of 2020.

Liquidity & Share Buyback

Knight-Swift exited the second quarter with cash and cash equivalents of $179.03 million compared with $156.70 million at the end of 2020. During the first half of 2021, the company returned $53.7 million to shareholders in the form of share repurchases and $30.3 million in the form of dividends.

2021 Guidance

Knight-Swift raised its adjusted earnings per share guidance for full-year 2021. It now expects the same to be in the range of $3.90-$4.05, compared with the previous expectation of $3.45-$3.60.The company’s improved guidance is a result of the expected benefits from its recent acquisitions of UTXL and AAA Cooper Transportation as well as improved freight market conditions.

The company anticipates net cash capital expenditures in the band of $500–$550 million for 2021. The amount will primarily be spent on replacements of existing tractors and trailers, investments in terminal network and driver amenities.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 9.84% due to these changes.

VGM Scores

Currently, Knight-Swift has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been 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.