Stifel On Knight Transportation: Upgraded To Buy On 'Growing Logistics Business'

Analysts at Stifel upgraded Knight Transportation Inc KNX from Hold to Buy today, citing potential upside for the stock for the first time in quite a while. Analysts like the company’s management team and its growth prospects.

Multiple avenues for growth
Knight has been growing earnings at a compound annual growth rate (CAGR) of 16 percent since 2009, a number which has impressed Stifel analysts. In addition, the company has pursued multiple channels of growth via acquisitions such as Barr-Nunn and via development of internal segments such as KoolTrans, Intermodal and Logistics.
Despite the strong growth initiatives, analysts like that Knight has maintained a healthy balance sheet. The company has a low net debt/EBITDAR ratio (0.5), a high ROIC (14.6 percent) and a low operating ratio (85.2 percent). Analysts note that each of these numbers are above-average compared to Knight’s peer group.

Relatively undervalued
Analysts note that Knights stock may appear fairly valued on an absolute level, but that it is historically undervalued when compared to the broader S&P 500. The stock’s PE of about 18.4 is in the middle of its historical range. However, its 15.9 percent premium to the broader S&P 500 is near a ten-year low.
Knight is also trading at a discount to the overall truckload space based on historical performance.

The numbers
Analysts revised their 2016 and 2017 EPS estimates for Knight from $1.70 to $1.68 and from $2.00 to $1.95, respectively. Analysts are now predicting year-over-year revenue growth for 2015, 2016 and 2017 at 20.6 percent, 13.8 percent and 15.1 percent, respectively.
Stifel has a $35 price target on Knight’s stock.