Knight-Swift Transportation’s management recently acknowledged an improvement in data points over the past few weeks, but they remain cautious about declaring a meaningful positive inflection in the truckload market. The Phoenix-based company reported adjusted earnings per share of 36 cents for the fourth quarter, exceeding the high end of management’s guidance range of 32 to 36 cents and beating the consensus estimate by 3 cents.
The company, listed on the NYSE under the symbol KNX, reiterated its first-quarter adjusted EPS guidance in the range of 29 to 33 cents, slightly below the consensus estimate of 30 cents at the time. Additionally, they introduced second-quarter adjusted EPS guidance of 46 to 50 cents, aligning closely with the consensus estimate of 49 cents.
CEO Adam Miller addressed concerns about the guidance not being more optimistic, citing severe winter weather as a potential factor distorting the recent improvement in tender rejection data. Miller emphasized the need for more sustained data before making a more aggressive assessment of the market.
In terms of operational performance, Knight-Swift saw a 4.4% year-over-year decline in truckload revenue to $1.1 billion, attributed to a 6% decrease in average tractors in service. However, this was partially offset by a 1.7% increase in revenue per tractor (excluding fuel surcharges). The company has been focused on optimizing tractor and trailer counts to enhance fleet utilization.
Despite challenges, rates have been trending positively during bid season, with the company seeking mid-single-digit rate increases, an improvement from the previous quarter. The truckload unit achieved a 92.2% adjusted operating ratio, marking significant year-over-year and sequential improvements.
Knight-Swift continues to integrate the U.S. Xpress fleet, aiming for cost synergies and operational efficiency. Looking ahead, the company anticipates a seasonal decline in TL segment revenue in the first quarter, followed by sequential improvement in the second quarter. Margins are expected to fluctuate based on market conditions, with targeted operating ratios reflecting market dynamics.
In the less-than-truckload segment, Knight-Swift reported a 20.2% year-over-year increase in revenue, driven by daily shipment growth and higher revenue per shipment. The addition of terminals and acquisitions impacted margins, resulting in a slightly higher adjusted operating ratio compared to the previous year.
The company’s logistics segment saw a modest increase in revenue alongside flat margins, while the intermodal segment experienced a load count increase offset by a decline in revenue per load. Future expectations include gradual improvements in market conditions and disciplined execution to navigate the evolving landscape.
Overall, Knight-Swift remains cautiously optimistic about the market outlook, emphasizing the need for continued data monitoring and strategic decision-making. The company’s proactive approach to operational enhancements and cost efficiencies demonstrates a commitment to long-term growth and stability in the transportation industry.
