“If we see continued strength then certainly there’s upside but we’re not banking on that at the moment,” Knight-Swift CEO Adam Miller said on a Wednesday call with analysts. (Photo: Jim Allen/FreightWaves)
Management from Knight-Swift Transportation acknowledged improving data points over the past few weeks but said it’s still too soon to say the truckload market has seen a meaningful positive inflection.
The Phoenix-based company reported adjusted earnings per share of 36 cents for the fourth quarter Wednesday after the market closed. The result was at the high end of management’s guidance range of 32 to 36 cents and 3 cents better than the consensus estimate.
Knight-Swift (NYSE: KNX) reiterated first-quarter adjusted EPS guidance in a range of 29 to 33 cents compared to the consensus estimate of 30 cents at the time of the print. It introduced second-quarter adjusted EPS guidance of 46 to 50 cents, which bracketed a consensus estimate of 49 cents.
Pressed on why the guidance wasn’t better, CEO Adam Miller told analysts on a Wednesday call that severe winter weather may be distorting the improvement in tender rejection data over the past couple of weeks.
“If we see continued strength, then certainly there’s upside but we’re not banking on that at the moment,” Miller said. “I think it’s too soon to call that any type of meaningful inflection. I think we need to see more sustained data like that before we get more aggressive on our view on the market.”
SONAR: Outbound Tender Reject Index for 2025 (blue shaded area), 2024 (green line) and 2023 (pink line). A proxy for truck capacity, the Outbound Tender Reject Index, shows the number of loads being rejected by carriers.Current tender rejections are outperforming the depressed levels seen in January 2024 and January 2023, and nearing market equilibrium. To learn more about SONAR, click here.
Carrier currently seeking mid-single-digit rate increases on TL bids
Truckload revenue fell 4.4% year over year to $1.1 billion as average tractors in service declined 6% to 22,208 units, which was partially offset by a 1.7% increase in revenue per tractor (excluding fuel surcharges).
The company has been rationalizing tractor and trailer counts in efforts to improve fleet utilization. Loaded miles per tractor increased 2.4%, but revenue per loaded mile (excluding fuel) was off 0.7% (1% higher than in the third quarter).
Miller said “rates have been trending positive” thus far in bid season and the company is currently asking for mid-single-digit rate increases, which is a step up from the low- to mid-single-digit range it was asking for a quarter ago.
The TL unit recorded a 92.2% adjusted operating ratio (inverse of operating margin), which was 170 basis points better y/y and 340 bps improved from the third quarter. The legacy TL fleet returned to an OR in the 80s for the first time in seven quarters.
The result was hampered as Knight-Swift continues to overhaul the U.S. Xpress fleet, which it acquired in July 2023.
That operation has shifted to a terminal network approach with shorter lengths of haul but higher revenue per mile. An annual run rate of $180 million in cost synergies has been achieved, but there are more opportunities available as it continues to swap out leased equipment for owned assets. Miller also said the unit has a sizable rate opportunity given the recent changes.
Looking forward, TL segment revenue is expected to see a low- to mid-single-digit seasonal decline from the fourth to the first quarter then improve sequentially by a mid-single-digit percentage in the second quarter. The company will continue to cull tractors in the first quarter. Sequentially, margins will decline modestly in the first quarter before improving modestly in the second quarter.
The goal is for upper-70s ORs in good markets, mid-80s in a normal market and upper-80s during downturns. Results in the current cycle were distorted by the acquisition.
Terminal growth, acquisition weigh on LTL results
The less-than-truckload unit reported a 20.2% y/y increase in revenue to $279 million. Daily shipments increased 13% with revenue per shipment (excluding fuel) 6.6% higher. Revenue per hundredweight, or yield, was up 9.6% (excluding fuel). The metric was partially helped by a 2.8% decline in weight per shipment.
The impact from the expansion and “slightly less supportive demand” in the quarter weighed on margins. The unit recorded a 94.5% adjusted OR, which was 900 bps worse y/y and 490 bps worse sequentially.
Knight-Swift now has all three LTL carriers acquired since 2021 operating on the same platform. It expects revenue to increase by 20% to 25% y/y in the first half of the year given the recent additions. The OR is expected to modestly improve sequentially in the first quarter and reach the high-80% range in the second quarter.
Logistics revenue increased 2.1% y/y, the combination of higher revenue per load offset by a decline in loads. The unit reported a 93.7% adjusted OR, which was 60 bps worse y/y.
Logistics revenue is expected to increase by a high-single-digit percentage in the first two quarters of the year alongside sequentially flat margins.
Table: Knight-Swift’s key performance indicators – Logistics and Intermodal
Intermodal revenue increased 4.9% y/y as a 10.2% increase in load count was partially offset by a 4.8% decline in revenue per load. The unit reported a 101.5% operating ratio, which was a seventh straight operating loss.
Looking forward, the unit is expected to see a breakeven result in the first quarter and a high-90% OR in the second quarter.
“The environment still calls for disciplined execution with little margin for error, but we anticipate 2025 will be a year of gradual recovery in market conditions that bridges to a more constructive 2026,” Miller stated in a Wednesday news release.
The fourth-quarter adjusted EPS number excluded acquisition-related expenses, noncash impairments on equipment and real estate, and a mark-to-market adjustment tied to the U.S. Xpress acquisition. The number included gains on equipment sales of $12.6 million, which was $5.4 million lower y/y, or a 3-cent headwind (assuming a normalized tax rate). An increase in net interest expense was also a 3-cent headwind y/y.
Shares of KNX were up 5.8% in after-hours trading on Wednesday.
