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Knight-Swift (KNX) Beats Q1 Earnings Estimates, Suspends View

Zacks Equity Research

Knight-Swift Transportation Holdings Inc. KNX first-quarter 2020 earnings (excluding 6 cents from non-recurring items) of 44 cents beat the Zacks Consensus Estimate of 36 cents. However, the bottom line declined 20% year over year due to persistent weakness in the freight environment amid severe effects of the COVID-19 pandemic. Additionally, total revenues of $1,124.8 million surpassed the consensus mark of $1,090.3 million but fekk 6.6% year over year with sluggish revenues at each of its three segments. Effective tax rate came in at 27.2% compared with 24% in the first quarter of 2019.

Total operating expenses declined 6% year over year to $1.02 billion. Adjusted operating ratio (operating expenses as a percentage of revenues) deteriorated to 88.6% from 88.4% in the year-ago quarter. Knight-Swift’s adjusted operating income declined 8% year over year to $116.79 million due to excess truck capacity amid the soft freight environment, intense competition in the intermodal market and coronavirus-induced consequences.

Knight-Swift Transportation Holdings Inc. Price, Consensus and EPS Surprise

 

Knight-Swift Transportation Holdings Inc. Price, Consensus and EPS Surprise
Knight-Swift Transportation Holdings Inc. Price, Consensus and EPS Surprise

Knight-Swift Transportation Holdings Inc. price-consensus-eps-surprise-chart | Knight-Swift Transportation Holdings Inc. Quote

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This Zacks Rank #3(Hold) company exited the first quarter with cash and cash equivalents of $119.13 million compared with $159.72 million at the end of 2019. During first-quarter 2020, it repurchased shares worth $34.6 million and retuned $14 million to shareholders through dividend payouts.You can see the complete list of today’s Zacks #1 Rank stocks here.

Due to uncertainties caused by the coronavirus pandemic, the company suspended its previously announced guidance for 2020.

Segmental Results

Revenues in the Trucking segment totalled (excluding fuel surcharge and intersegment transactions) $821.08 million, down 5.1% year over year. Results were hampered by 2.7% decline in average revenue per tractor. Average revenue per tractor was weak in the quarter due to a 3.1% reduction in revenue per loaded mile, excluding fuel surcharge and intersegment transactions).  Adjusted segmental operating income also dropped 4.1% to $110.8 million. Adjusted operating ratio (operating expenses as a percentage of revenues) improved 20 basis points (bps) to 86.5% in the quarter under review. Notably, lower value of this key metric bodes well for the company.

Revenues in the Logistics segment (before intersegment transactions) amounted to $76.76 million, down 12% year over year due to 10% decline in brokerage revenues. While adjusted operating ratio deteriorated 360 bps to 95.2%, segmental operating income slumped 48.9% to $3.71 million.

Revenues in the Intermodal segment (excluding intersegment transactions) totaled $94.6 million, down 18.2% year over year as a result of load count and revenue per load declining 13.2% and 5.8%, respectively. Segmental adjusted operating ratio came in at 102.8%, down 480 bps. Segmental operating loss came in at $2.74 million.

Sectorial Snapshot

Notably, Knight-Swift is not the only Zacks Transportation company to have surpassed the earnings estimate so far. Other notable companies in the same space that have beaten estimates are CSX Corporation CSX, Union Pacific Corporation UNP and Canadian Pacific Railway Limited’s CP.

CSX reported first-quarter 2020 earnings of $1 per share, beating the Zacks Consensus Estimate of 92 cents. However, the bottom line slipped approximately 2% year over year due to a drop in revenues.

Union Pacific’s first-quarter 2020 earnings of $2.15 per share surpassed the Zacks Consensus Estimate of $1.86. Moreover, the bottom line increased 11.4% on a year-over-year basis.

Canadian Pacific’s first-quarter 2020 earnings (excluding $1.08 from non-recurring items) of $3.3 (C$4.42) per share surpassed the Zacks Consensus Estimate of $2.86. Quarterly earnings surged more than 55% year over year.

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