Knight Transportation Profits Down 28%, Match Forecasts After Adjustments for Swift Merger
Knight Transportation Inc. profits declined 28% in the second quarter, the latest in a series of unfavorable earnings reports from truckload carriers matching what was anticipated to be a tough first half of 2017.
The Phoenix-based carrier made $18 million in profits or 22 cents per share for the three-month period ending June 30, 2017. However, when the company adjusted results for about $2.6 million in post-tax expenses related to the Swift Transportation merger, the result was a 17% decline in earnings to $20.6 million or 25 cents.
The Bloomberg News consensus forecast of industry analysts called for $20.4 million in adjusted earnings or 25 cents, essentially equaling the final tally.
Revenue fell 1.1% to $273.2 million, but it went down 2.7% to $247 million when fuel surcharges were removed from the equation.
“The freight environment began to show signs of improvement as we experienced more noncontract opportunities during the second quarter of 2017 as compared to the same quarter last year. Our revenue per loaded mile increased slightly year over year, which marks the first year over year improvement since the third quarter of 2015,” Knight CEO Dave Jackson said. “The 2017 bid season has been competitive, similar to 2016, however, we expect the recent capacity tightness and noncontract pricing strength to lead to an improved rate environment. This quarter our tractor utilization was negatively impacted by a 3.4% decline in average length of haul and a difficult experienced driver recruiting market.”
Knight’s truckload performance sharply declined across the board in the second quarter. Revenue dropped 4.8% to $194 million, operating income went down 27% to $25.8 million and the operating ratio deteriorated 190 basis points to 84.6%, signaling that expenses ate up a larger portion of the revenue than one year ago.
The average length of haul dropped to 488 miles from 505 miles. Average revenue per tractor decreased 2.9% to $42,176.
Logistics business echoed the same themes at third-party logistics companies where revenue grew but margins compressed and lowered operating income. For Knight, revenue grew 6.1% to $53 million but operating income dropped 5.3% to $2.6 million. The operating ratio worsened 60 basis points to 95%. Brokerage revenue and load counts increased 12% year-over-year in the quarter, but the margins dropped from 16.8% on average in the second quarter of 2016 to 14.3% this year.
Knight’s logistics segment consists of brokerage, intermodal marketing and other logistics services.
The used equipment market continued to drag down results with an $800,000 gain in the past quarter compared with a $2.7 million gain a year ago. Knight let its fleet age from 1.8 years on average to 2.6 years to compensate for the weak demand and oversupply in the marketplace.
Through the first half, profits dropped 32% to $32.8 million or 40 cents without adjusting for the merger transactional costs. Revenue was off 0.7% to $544.4 million but declined 3% to $492 million when fuel surcharges were removed.
Knight ranks No. 30 on the Transport Topics Top 100 list of the largest North American for-hire carriers.
