Knight-Swift Transportation Holdings Inc KNX is down 18 percent over the last two months, and Stifel Nicolaus sees a buying opportunity.
The Rating
Analysts David Ross and Austin Remey upgraded Knight-Swift to Buy with a $48 price target.
The Thesis
In the first quarter, the Knight Trucking segment outperformed peers in operating ratio and related growth, and its above-average exposure to spot business drove significant increases in revenue per tractor. At the same time, Swift tripled its earnings before interest and taxes from the previous year’s period.
Stifel expects Knight leadership to continue to drive “formidable” Swift operating efficiency over the next few years and maximize long-term potential in the refrigerated unit.
As such, the analysts advised buying shares below $40, a strategy accounting for growth in earnings rather than in organic truck or volume sales.
“2Q isn't usually the best-performing quarter for trucking stocks, so there should be time for investors to build positions in KNX and other Buy-rated TL names over the next few months, as we do not believe the supply issues will be resolved soon, because, put simply, drivers — not trucks — are the limiting factor,” Ross and Remey wrote in a note.
Price Action
At time of publication, Knight-Swift was trading up 2.4 percent at a rate of $41.58.
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