Knight-Swift Reports Earnings Drop Amid Revenue Growth
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Knight-Swift Transportation Holdings saw its first-quarter bottom-line results swing from a profit to a loss amid what company CEO Adam Miller described as “one of the deepest freight recessions the truckload industry has ever felt.”
The Phoenix-based truckload carrier on April 24 reported a Q1 net loss of $2.64 million, or negative 2 cents a diluted share, for the three months ending March 31. That compared with a gain of $104.3 million, 64 cents, during the same time the previous year.
The drop came even as the company’s consolidated total revenue increased by 11.3% to $1.82 billion from $1.64 billion. Knight-Swift attributed the revenue growth largely to its July 2023 acquisition of U.S. Xpress Enterprises, whose operations are being integrated into the truckload and logistics segments.
Knight-Swift ranks No. 7 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
The Q1 results fell below expectations by investment analysts, who were expecting EPS of 19 cents per share and revenue of $1.86 billion, according to Zacks Consensus Estimate.
Miller said the earnings drop was a reflection of persistently tough market conditions.
“Cost depletion continues to be a challenge, labor is staying tight and interest rates are up significantly,” he said during a call with investors. “This has resulted in both significant pricing and cost pressures and has led to razor-thin margins.”
He also noted that historic industry trends have been tested.
“It’s clear that the highs during the pandemic have led to the lows in the current environment,” Miller said. “As a cyclical industry, we are accustomed to changes in the market. We have never seen the extremes we are currently experiencing.”
That said, Miller is hopeful for a robust turnaround.
Check out Transport Topics' updated Top 100 list of the largest logistics companies in North America, and explore how the industry's top players have adapted to a tough freight market and are preparing for the future. Tune in above or by going to RoadSigns.ttnews.com.
“Given that we are at the lowest levels of operating performance our business may have ever seen, we believe we are positioned to benefit from significant operating leverage as business conditions improve,” he said. “We believe we have positioned our business to endure a difficult market and to be prepared to rapidly improve margins and cash flow when we begin to experience an inflection in the market similar to our performance in previous cycles.”
Revenue in the Knight-Swift truckload segment increased 26.3% year-over-year to $1.09 billion from $866 million. But operating income fell 80% to $23.2 million from $115.9 million. The report noted that pricing challenges in the segment were exacerbated by worse-than-average weather disruption, leading to reduced volumes and higher operating costs. The segment consists of irregular route truckload, dedicated truckload, refrigerated, expedited, flatbed and cross-border operations.
Miller said he expects synergies across the U.S. Xpress operations to improve now that Knight-Swift has had time to “establish the right rigors around cost and revenue management.” He added, “We believe this business is positioned to perform at levels significantly better than legacy U.S. Xpress. We expect to close the margin gap within our legacy Knight and Swift fleets when we have a more favorable market.”
Revenue in the Knight-Swift less-than-truckload segment revenue increased 12.6% to $241 million from $213.9 million during the same time last year. Operating income decreased 23.7% to $20.3 million from $26.6 million last year. The segment’s operations were concentrated in regions exposed to the severe winter weather during the quarter, which took a particular toll on network and operating costs, Knight-Swift said. The segment also had to contend with higher maintenance and labor costs amid volume shifts and longer travel to new facilities.
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Revenue in Q1 for the logistics segment decreased 7.3% to $126.7 million from $136.8 million last year, while operating income fell 80.7% to $2.47 million from $12.8 million. This segment saw load count fall by 10.1% year-over-year as the company diverted loads to its legacy truckload business to partially offset loss of contractual volumes after a series of bid cycles. The persistently weak demand environment was further pressured by weather disruptions.
Intermodal segment revenue decreased 20.4% to $88 million from $110.6 million during the year-ago period. The segment also saw its bottom line swing to an operating loss of $4.91 million compared with operating income of $5.1 million. The drop in revenue was driven by a 19.1% decline in revenue per load that was partly due to the inclusion of project revenue in the prior-year period, and a 1.6% decline in load count as a result of soft demand and competitive truck capacity, the company said.
