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

Knight-Swift Transportation Holdings Inc.’s (NYSE: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.

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. (NASDAQ:EXPD) , Air Lease Corporation (NYSE:AL) and Hertz Global Holdings, Inc (NYSE: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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