Knight-Swift Transportation confirms support for strong earnings


Knight-Swift Transportation is hammering a bottom

Knight-Swift Transportation (NYSE: KNX) delivered a very solid report and we are not surprised. Not only is the industry supported by strong tailwinds, but the company is working on growth and its competitors have also made strong reports. The findings of the report are that revenue is increasing across all segments, margins are increasing, and inventory is decreasing because of this. In our view, the move is less than bearish due to both technical and fundamental factors within the market. Ultimately, Knight-Swift Transportation is growing, profitable, buying back stock and paying a dividend, which we believe indicates rising stock prices.

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Knight-Swift Transportation defeats and augments F22 guidance

Knight-Swift Transportation had a strong quarter in which revenue grew 42.2% gross and 38.8% excluding fuel surcharges. Gains were driven by organic strength and acquisitions which are both expected to continue as Knight-Swift attempts to expand the country’s dedicated trucking operation. All segments contributed to growth and margin with notable performances in trucking, logistics and intermodal. Trucking saw year-over-year revenue growth but, more importantly, a 460 basis point margin improvement. The Intermodal segment also saw a substantial improvement in margin, 1360 basis points, while it increased by 7.5% on the revenue line. Logistics grew the most, up 139%, and demand remains high.

Earnings were $245.6 million on an adjusted basis, or 13.50% of revenue to drive better than expected results on net income. GAAP $1.52 is up from last year’s $0.82, while the adjusted $1.61 is up from $0.99 and beats Marketbeat.com consensus by 0, $18. Looking ahead, the company expects continued strength in the coming year and has guided the market to an EPS outlook above the current consensus. The expected $5.10-$0.530 compares to $5.01 and could be weak in light of the demand trends we are seeing in the economy.

Analysts support Knight-Swift Transportation

There hasn’t been any analyst activity following Knight-Swift’s earnings report yet, but we think it’s only a matter of time before there is. Based on analyst tracking data from Marketbeat.com, we believe activity will include price targets and rating upgrades that will drive stock prices higher. The current rating is a low buy with a noticeable upward trend in the number of analysts covering the stock. The stock has attracted 7 analysts over the past year for a 50% increase in coverage. Along with this, there is a consensus price target of $62 which implies 14% upside and has risen. The most recent cry from analysts was a downgrade to Peer Perform from Outperform but, before that, there was a series of months of price target increases, initiated coverage and upgrades.

The technical outlook: Knight-Swift Transportation confirms its support

Knight-Swift Transportation shares recently pulled back in support and confirmed that support in the days leading up to the earnings report. Price action fell in the wake of the report, but remains within recent ranges and above support with evident buying at the lower end of the range. Assuming support holds at or near $54.30, we see this stock continuing sideways in its $54.30-$62 range with a chance for new highs later in the year. These highs can be triggered by earnings, analyst activity, or a combination of both.
Knight-Swift Transportation confirms support for strong earnings

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