Knight-Swift beats first quarter expectations, pulls guidance on COVID concerns

Knight-Swift truck on highway

The nation’s largest truckload (TL) carrier, Knight-Swift Transportation Holdings Inc. (NYSE: KNX) reported first quarter 2020 earnings per share (EPS) of $0.44, well ahead of analysts’ expectations of $0.35.

The Phoenix-based carrier recorded $2.3 million, or $0.01 per share, in “incremental expenses associated with our drivers and terminal employees to ensure safety and that communities received essential products.” A similar amount is expected to be incurred during the second quarter.

Knight-Swift Consolidated Financials

Given the “uncertainties regarding the duration and impact of the COVID-19 pandemic,” the carrier pulled its 2020 full-year adjusted earnings guidance, which had called for EPS of $2.00 to $2.15.


The TL segment reported a 5.1% year-over-year decline in revenue excluding fuel surcharges to $821 million. The decline was the result of operating 472 fewer tractors in the quarter compared to the first quarter of 2019, which was partially offset by a slight increase in miles per tractor. Revenue per tractor was 2.7% lower as revenue per loaded mile declined 3.1%. The TL adjusted operating ratio (OR) improved 20 basis points year-over-year to 86.5% as cost control initiatives resulted in a 3.2% reduction in operating expenses on a per mile basis.

TL Key Performance Indicators

From the press release, “Our diverse customer base has permitted us to balance our truckload capacity between customers with significant declines in volumes and those experiencing surges in demand for essential consumer products.”

The carrier reported that load volumes have declined in April, “down in the mid to high single digits,” which has resulted in “downward pressure” on revenue per loaded mile and miles per tractor.

The division reported lower gains on equipment sales, down $8.8 million year-over-year or $0.04 in EPS, due to a “weaker used equipment market.” Gains on the sale from the trade of tractors and trailers is booked as an offset to operating expenses, lowering expenses considerably for larger carriers.

Prices for used trucks have fallen significantly after record purchasing of new tractors through and after the freight peak of 2018. As post-peak volumes fell off significantly and excess capacity pushed TL rates lower, the demand for new equipment fell, negatively impacting the trade-in values for older equipment. Further, difficulty accessing credit and higher insurance claims and expenses have weighed on equipment demand.

3 Year Old Used Truck Price Index (USA) – SONAR: UT3.USA

Logistics and Intermodal

Revenue in the logistics segment, primarily brokerage, declined 12% year-over-year to $77 million as brokered loads declined 6.5% and revenue per load was down 3.8%. Many truck brokerage operations saw a margin squeeze in the quarter as COVID-19-related shelter-in-place restrictions resulted in panic buying as consumers rushed to stock up on household necessities. Truck capacity tightened and the cost of purchased transportation increased meaningfully. Knight-Swift reported a 310-basis point decline in brokerage gross margin to 14.7% in the quarter.

Logistics and Intermodal Key Performance Indicators

Intermodal revenue declined 18.2% year-over-year to $95 million as loads declined 13.2% and revenue per load dipped 5.8%. Demand for intermodal remains subdued as diesel fuel prices have declined and ample TL capacity is available in the market. Total U.S. intermodal traffic on the railroads was 9% lower year-over-year in the first quarter according to the Association of American Railroads. Knight-Swift’s adjusted intermodal OR was 102.8% in the period, 480 basis points worse than the year ago quarter.

The carrier ended the quarter with $621.7 million in available liquidity and net debt of $787.9 million. The company generated $155.3 million in cash flow from operations, which was diminished by a $93.4 million cash settlement related to the classification of independent contractors.

Knight-Swift lowered its full-year 2020 net capital expenditures (capex) guidance to $515 million to $540 million (formerly it was $550 million to $575 million), providing it with another $35 million in liquidity.

“We do not foresee material liquidity constraints or any issues with our ongoing ability to meet our debt covenants.”

The company raised its quarterly cash dividend to $0.08 per share, from $0.06 per share, in February. The company does not plan to change or suspend its dividend.  

“We believe we are well-prepared for the sustainability of our business from a balance sheet perspective with a very conservative debt balance and a meaningful level of available liquidity, coupled with a conservative, cost-minded culture.”