Management from Knight-Swift Transportation sees weak demand carrying through the primary quarter with hopes of normal sequential improvement by spring. The corporate announced worse-than-expected fourth-quarter results on Thursday as barely favorable trends to start out the period turned sour within the closing weeks.
Knight-Swift (NYSE: KNX) reported a headline net lack of 7 cents per share for the 2023 fourth quarter. Excluding acquisition expenses, legal fees and impairments related to the sale of apparatus, adjusted earnings per share were just 9 cents in comparison with the consensus estimate of 44 cents and the year-ago results of $1.
“The complete truckload market capability oversupply, coupled with customers’ efforts to scale back inventory levels have contributed to a difficult operating environment,” said President and CEO Dave Jackson.
The period included a $71.7 million operating loss in its third-party insurance offering, which was a 30-cent drag on the number. Knight-Swift said it has initiated a process to exit that business because it continues to see unfavorable claims developments among the many pool of small carriers to which it brokers insurance. Through the downturn, the unit has also struggled to gather premiums from some operators.
All outstanding liability policies might be canceled and the unit might be unwound in the course of the first quarter. Knight-Swift will still have some claims exposure but significantly lower than the magnitude experienced in recent quarters.
Analysts lowered fourth-quarter numbers heading into the tape given a falloff in activity industrywide within the last two weeks of December.
Using a traditional tax rate, higher net interest expense (resulting from acquisitions) was an 8-cent headwind in comparison with the prior yr while lower gains on equipment sales were a 1-cent headwind.
![](https://www.freightwaves.com/wp-content/uploads/2024/01/24/Knight-Swift-KPI-Consolidated.jpg)
The corporate only provided first-half 2024 guidance in comparison with a full-year outlook, which it normally provides in its fourth-quarter report every year. Knight-Swift is looking for adjusted earnings per share of 90 cents to 98 cents within the period (39 cents in the primary quarter on the midpoint of that range and 55 cents on the midpoint of the second quarter range).
Management said inclement weather led to double-digit-percentage revenue declines in the primary two weeks of the yr, which was partly the explanation for the shortened outlook.
The brand new guide assumes continued softness within the truckload business in the primary quarter with some seasonality within the second. Contract rates are expected to stay stable sequentially. Less-than-truckload demand is anticipated to remain strong with improving yields.
The 94-cent first-half guide (on the midpoint) is lower than half of the $2.08 consensus estimate on the time of the print. Most analysts expect at the least some extent of acceleration in TL fundamentals within the back half of the yr.
The TL segment reported a 26% y/y increase in revenue (excluding fuel surcharges) to $1.16 billion as average tractors in service increased 30% and revenue per tractor was off 3%. The y/y comparison included the acquisition of U.S. Xpress, which closed on July 1.
Revenue per loaded mile (excluding fuel) was down 12% y/y, which pushed margins lower. A 93.9% adjusted operating ratio was 1,120 basis points worse y/y. U.S. Xpress produced operating income on an adjusted basis within the period after multiple quarters of losses. The fleet, nonetheless, was a 250-bp drag on the general segment.
Jackson said only a “minority” of its customers try to push pricing lower currently. It noted that a continuation of elevated costs has left it with little ground left to concede.
“We should not ready to lower our rates through bids immediately,” Jackson said.
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The LTL segment recorded a 14% y/y increase in revenue (excluding fuel) to $232 million. Shipments were up 12% y/y and revenue per shipment increased 2% (up 7% excluding fuel). Revenue per hundredweight was up 10% excluding fuel.
Knight-Swift added 14 LTL terminals to its network in 2023. The corporate said it is going to add a complete of 25 terminals in 2024, a few of which were formerly occupied by Yellow Corp. It said it takes 60 to 90 days from open until the brand new service centers begin to record breakeven results.
The LTL unit recorded an 85.5% adjusted OR within the period, which was flat y/y.
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The logistics unit recorded a 5% y/y decline in revenue even with the addition of U.S. Xpress. Revenue per load was off 7% and the segment recorded a 93.1% adjusted OR, which was 670 bps worse y/y.
The intermodal segment lost money for a 3rd straight quarter. Revenue was down 16% y/y as revenue per load fell 20%, which was just partially offset by a 4% increase in volumes. A 104.7% OR was 1,000 bps worse y/y.
![](https://www.freightwaves.com/wp-content/uploads/2024/01/24/Knight-Swift-KPI-Logistics-and-Intermodal.jpg)
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