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Knight-Swift slashes profits outlook

April 17, 2024
The company has lost some business during a fierce bid season, driving more of its capacity into the weak spot market. The effects of January’s winter storms are also lingering.

Knight-Swift Transportation Holdings Inc. leaders have lowered their profit forecasts for the first six months of this year, citing soft volumes and falling prices in the early part of this year’s bid season.

The warning from newly named CEO Adam Miller and CFO Andrew Hess also said that Knight-Swift, the No. 3 company on the 2024 FleetOwner 500: For-Hire list, had to deal with more disruptions than expected from the winter storms that hit much of the country in January. However, the continued supply-demand imbalance in the trucking sector was the major factor.

“In some cases, we have lost contractual volumes because we were not willing to commit to further concessions on what we view as unsustainable contractual rates,” the company said in a statement. “This resulted in more of our capacity being allocated to the spot market, which creates further pressure on revenue per mile and utilization in the near term but positions capacity to react to changes in the market.”

See also: Knight-Swift CEO turns over fleet to 'next generation'

For the first quarter, Miller and Hess expect Knight-Swift will produce adjusted earnings per share of 11 cents to 12 cents, down from the company’s previous forecast of about 40 cents. Similarly—and based on the assumption that market conditions won’t quickly improve—they have lowered their Q2 profits-per-share forecast to about 28 cents from 55 cents.

Knight-Swift’s warning echoes many of the April 16 talking points from the leadership team at J.B. Hunt Transport Services Inc., which ranks one spot behind Knight-Swift on the FO500. With capacity not leaving the market at the pace many participants and analysts had expected and executives looking to protect their margins, both companies are losing some business to competitors willing to push down prices further. And, despite a run of economic data points that have leaned more toward robust than sagging, there isn’t yet enough demand from shippers to sustain higher prices.

J.B. Hunt President Shelley Simpson said her team is confident that sticking to its guns on pricing and long-term growth investments will prove to be the right plan. Knight-Swift has followed the same general path in the past year, partly by buying U.S. Xpress as well as 25 terminals that had been owned or leased by the defunct Yellow Corp.

“This strategy may be the right one,” Stifel analyst Bruce Chan wrote in reaction to J.B. Hunt’s earnings report. “But that could make for a rough ride for investors through the freight trough and into a muted cycle recovery.”

Shares of Knight-Swift (Ticker: KNX) fell more than 4% to $48.53 after its April 17 announcement. However, they’re still up slightly from six months ago, and its market capitalization is now about $7.8 billion.

About the Author

Geert De Lombaerde | Senior Editor

A native of Belgium, Geert De Lombaerde has more than two decades of business journalism experience and writes about markets and economic trends for Endeavor Business Media publications FleetOwner, Healthcare InnovationIndustryWeek, Oil & Gas Journal and T&D World. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati and later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post and reported primarily on Middle Tennessee’s finance sector as well as many of its publicly traded companies.

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