Evercore ISI Sees Knight Transportation As 'Lacking Catalyst,' Downgrades To Hold

Evercore ISI’s Darren Hicks downgraded the rating for Knight Transportation KNX from Buy to Hold, while maintaining the price target at $26. Hicks believes that the company’s current stock valuation “reasonably reflects growth opportunities through 2016, its well-established history as a best-in-class operator and a relatively subdued macro-economic backdrop as well.”

The analyst added that Knight Transportation faces challenges in the medium-term, with the broader US macroeconomic environment continuing to suggest a negative earnings growth outlook, partially due to “a softer uncontracted freight market for KNX than it has experienced in the past.”

The company has not pursued meaningful organic growth opportunities, in an attempt to conserve cash. While this decision is prudent, share price outperformance is unlikely “with truncated near-term fleet investment combined with a reticence to repurchase shares,” Hicks wrote.

He expects the shares to remain range bound till there is a significant improvement in the macro environment, resulting in better-than-expected truckload volumes and utilization, or “an unexpected completion of its existing share buyback program and subsequent initiation of a new one.”