Knight-Swift (KNX) Q2 Earnings Top Estimates, Revenues Miss

Knight-Swift Transportation Holdings Inc.’s KNX second-quarter 2019 adjusted earnings (excluding 12 cents from non-recurring items) of 58 cents per share beat the Zacks Consensus Estimate by a penny. Moreover, the bottom line inched up 3.6% on a year-over-year basis. Lower costs aided this upside.

However, total revenues of $1,242.1 million lagged the consensus mark of $1,264.8 million and also decreased 6.7% year over year. This downside was primarily due to the persistent softness in freight demand.

Notably, effective tax rate came in at 24.7% in the quarter under review compared with 22.9% in the second quarter of 2018. For the full year, the same (before discrete items) is still expected to be in the 25-26% range.

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

From the first quarter of 2019 onward, the company started reporting under three segments — Trucking, Logistics and Intermodal — following the realignment of its segments.

Segmental Results

Revenues in the Trucking segment totaled (excluding fuel surcharge and intersegment transactions) $900.65 million, down 4.3% year over year. Results were hampered by 3% dip in average revenue per tractor (miles per tractor declined 6.4% in the quarter). Adjusted segmental operating income inched up 1% to $128,303 million. Adjusted operating ratio (operating expenses as a percentage of revenues) also improved 70 basis points (bps) to 85.8% in the quarter under discussion. Notably, lower value of this key metric bodes well for the company.

Revenues in the Logistics segment (before intersegment transactions) amounted to $80.3 million, down 16.7% year over year due to 13.8% decline in brokerage revenues. While adjusted operating ratio improved 140 bps to 93.7%, segmental operating income climbed 8.8% to $5.02 million.

Revenues in the Intermodal segment (excluding intersegment transactions) totaled $117.73 million, slipping 1.8% year over year as a result of 7.7% fall in load counts. Segmental adjusted operating ratio came in at 96.4%, deteriorating 10 bps while operating income contracted 6.4% to $4.19 million.

Operating Results

Total operating expenses decreased 6.1% year over year to $1.13 billion. Adjusted operating ratio (defined as operating expenses as a percentage of revenues) improved to 87.8% from 88.7% in the year-ago quarter. Knight-Swift’s adjusted operating income inched up 1.5% year over year to $136.97 million owing to rise in trucking revenue per loaded mile (excluding fuel surcharge), expanded margins at the Logistics segment and efficient cost-control measures.

Liquidity

This Zacks Rank #5 (Strong Sell) company exited the second quarter with cash and cash equivalents of $55.06 million compared with $82.49 million at the end of 2018. Long-term debt (less current portion) amounted to $364.71 million compared with $364.59 million in December 2018. During the first half of the year, Knight-Swift repurchased shares worth $86.9 million.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dividend Update

The company’s board has declared a quarterly cash dividend of 6 cents per share, payable Jun 27, 2019 to shareholders of record as of Jun 3.

Outlook
 
Knight-Swift expects adjusted earnings per share in the range of 54-57 cents for the current quarter. The mid-point (55.5 cents) of the guided range is below the Zacks Consensus Estimate of 57 cents. The same for the fourth quarter is anticipated in the band of 73-77 cents. The company continues to expect capital expenditures for the full year in the $550-$575 million range.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting second-quarter earnings reports from key players, namely Expeditors International of Washington, Inc. EXPD, Air Lease Corporation AL and Hertz Global Holdings, Inc HTZ. While Expeditors and Hertz will report earnings numbers on Aug 6, Air Lease will announce the same on Aug 8.

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