Shares of trucking firm
Knight-Swift Transportation
are soaring after earnings. The results, however, were good, not great. The reaction says more about the mood of investors than the trucking business or the economy.
Knight (ticker: KNX) announced third-quarter earnings per share (EPS) of 41 cents from sales of $2 billion on Thursday evening. Wall Street was looking for 36 cents and $1.9 billion, respectively. A year ago, Knight reported EPS of $1.27 and sales of $1.9 billion.
It’s a solid quarter. Guidance was actually cut by a nickel. The EPS midpoint for 2023 is now $2.15 from $2.20. Still, the updated full-year guidance implies EPS of about 52 cents a share in the fourth quarter. Wall Street is modeling 47 cents.
Guidance, according to the company, is based on stable truckload pricing.
“Freight demand remains stable at low levels in the truckload market and relatively strong in the less-than-truckload [LTL] market,” said CEO David Jackson in a news release.
LTL freight refers to goods that don’t require a full truckload. These smaller loads typically result in several separate shipments being transported on one truck.
LTL demand has been helped by the demise of Yellow and accounts for about 12% of Knight sales.
It’s all pretty good amid a weak freight market when the U.S. industrial economy isn’t growing and retailers are still working off higher inventories. Knight shares are acting like things are great, up about 17.7% at $54 in premarket trading, while
S&P 500
and
Dow Jones Industrial Average
futures were both down about 0.4%.
It’s a great move for a good quarter. TD Cown analyst Jason Seidl called the quarter in line and wrote that fourth-quarter guidance was a little better than expectations, but didn’t change his Buy rating or $58 price target.
Evercore ISI analyst Jonathan Chappell pointed out that the third-quarter reaction essentially just makes up for the recent roller-coaster ride the stock has been on. Shares were $55.85 before the second-quarter earnings report. Now they are $54. They entered Friday trading at less than $46 a share.
He rates shares Hold and has a $55 price target for the stock.
An upgrade is helping shares, but it isn’t a really bullish upgrade. It was only to Hold from Sell. J.P. Morgan analyst Brian Ossenbeck was the upgrader. He still doesn’t see pricing improvement for truckers in 2024 as “guaranteed,” which is why he only went to Hold. His price target went to $57 a share from $54.
It appears that investors were just way too worried about a bad outcome. Stability was enough.
Investors were ready for something worse. Shares of
J.B. Hunt Transport Services
(JBHT) dropped 8.8% after the company missed Wall Street estimates, by 3 cents or 2%, on Oct. 18.
Coming into Friday trading, Knight stock was down about 12% so far this year, down 18% over the past three months, and off about 1% over the past 12 months. All time frames were in the red.
Write to Al Root at [email protected]
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