Knight-Swift Slashes H1 2024 Expectation by More Than Half

The company said adjusted earnings per share for the first quarter will range between 11 and 12 cents compared to a 39-cent outlook (at the midpoint of the guidance range) provided in late January. It is calling for adjusted EPS of 26 to 30 cents in the second quarter versus the previous 55-cent expectation (at the midpoint of the range).

Knight-Swift's KNX new outlook for the first quarter includes an 8-cent-per-share loss associated with the shutdown of its third-party insurance business. That unit brokered liability coverage to small carriers. It struggled to collect premiums and endured unfavorable claims developments in recent quarters. In total, it lost $125 million last year, $72 million in the fourth quarter alone.

Shortly after the company announced it was shuttering the insurance business, CEO Dave Jackson stepped down.

Analysts will likely add back the 8-cent hit to Knight-Swift's first-quarter result as the insurance unit is being disposed. That puts adjusted EPS at 19 to 20 cents for the quarter, compared to the current consensus estimate of 29 cents.

The consensus estimate for the second quarter was 48 cents on Tuesday.

Knight-Swift said it has had to put more equipment in the spot market as it has walked away from some contractual freight.

"The early part of the bid season led to greater than expected pressure on freight rates as some shippers are still trying to push rates down further. 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" a news release said.

Running more equipment in the spot market offers no rescue. Depressed spot rates are also weighing on total revenue per mile, and absent contractual commitments, equipment utilization metrics have moved lower. However, the company believes this is the best course as it positions the capacity to quickly react to any positive inflection.

It is forecasting a mid-90% operating ratio for the legacy TL business in the second quarter, with the acquired U.S. Xpress fleet seeing break-even results.

Chart: NTIL. The National Truckload Index (linehaul only – NTIL) is based on an average of booked spot dry van loads from 250,000 lanes. The NTIL is a seven-day moving average of linehaul spot rates excluding fuel.

The logistics business is not only suffering from unfavorable demand and yield dynamics, but also as the company has "diverted loads to the asset division to partially offset the contractual volume losses." The logistics unit is expected to see 10% to 15% year-over-year (y/y) revenue growth due to the U.S. Xpress acquisition and an OR in the mid-90% range during the second quarter.

The segment posted a 93.1% OR in the fourth quarter.

The release said its less-than-truckload unit continues to see y/y volume and yield growth, but operating income will be worse than expected due to its geographic concentration in regions most impacted by winter storms. It noted LTL volumes "normalized into March and April."

The second-quarter call for LTL is y/y revenue growth of 10% to 15% and a flat OR. (2023 second-quarter OR was 85.1%.)

Knight-Swift's intermodal business is "approaching breakeven during the quarter with revenues down slightly year-over-year."

The update comes one day after a big earnings miss from multimodal provider J.B. Hunt Transport Services JBHT. A tough bid season and elevated costs associated with carrying excess capacity to meet future demand were to blame for the miss.

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