Knight-Swift Transportation said it’s focused on cost control as it awaits a material inflection in demand. While management is “still cautious” it noted that customer conversations are a little more stable now that tariff concerns are easing.
The Phoenix-based transportation and logistics provider reported second-quarter adjusted earnings per share of 35 cents, which was in line with management’s prior guidance (30 to 38 cents), 2 cents ahead of the consensus estimate and 11 cents higher year over year.
Consolidated revenue was 1% higher y/y at $1.86 billion (2% higher excluding fuel surcharges). An adjusted operating ratio (inverse of operating margin) of 93.8% was 80 basis points better y/y.
The adjusted EPS result excluded expenses tied to past acquisitions, asset impairments and severance costs. The number included gains on equipment sales of $11.7 million, a $5.7 million y/y increase, or a 3-cent tailwind. A lower tax rate in the period provided a 2-cent tailwind.
Tractor utilization improves again, still waiting on demand
Knight-Swift’s (NYSE: KNX) truckload revenue fell 3% y/y to $1.07 billion as average tractors in service fell 7% but revenue per tractor was up 4%. Loaded miles per tractor improved 4%, largely due to the company’s tractor utilization initiatives, with revenue per loaded mile (excluding fuel) coming in flat y/y at $2.74.
This was the eighth consecutive quarter of y/y improvement in miles per tractor. Revenue per mile dipped 4 cents from the first quarter but management said the metric has improved modestly in recent weeks. Contractual rate increases again averaged low- to mid-single-digits.
The TL segment reported a 94.6% adjusted OR, 260 bps better y/y but only 100 bps improved from the seasonally weak first quarter. Turnaround efforts at U.S. Xpress drove 300 bps of margin improvement at that fleet.
Management expects modest sequential improvements in TL revenue and margin in the third quarter.
LTL results suffer from front-loaded growth costs, but margins to improve in back half
The less-than-truckload unit reported a 28% y/y revenue increase to $338 million, largely due to the acquisition of Dependable Highway Express (DHE) nearly one year ago.
Shipments per day were up 22% with revenue per hundredweight, or yield, up 10% y/y (excluding fuel surcharges). The yield metric benefitted from a 3% decline in weight per shipment and a 14% increase in average length of haul. However, contractual rate negotiations produced mid- to high-single-digit increases in the period.
The LTL unit reported a 93.1% adjusted OR, which was 720 bps worse y/y. Knight-Swift cited DHE integration costs and startup expenses at new terminals as the headwinds. It opened three new terminals in the quarter and moved another facility. Door count is up 8% year to date (28% higher y/y in the quarter).
Management forecast 100 to 200 bps of sequential OR improvement and said a variety of cost initiatives and technology enhancements should allow it to buck the typical sequential trend of margin degradation in the second half of the year.
Intermodal losses to narrow
Knight-Swift’s intermodal segment was unprofitable for a ninth consecutive quarter, reporting a 104.1% OR. Loads were off 12% y/y and revenue per load was down 2%. The company said it walked away from some business that had inferior pricing during the period.
The company expects a high-single-digit sequential increase to intermodal load counts in the third quarter given recent award activity. Cost reductions and a move to private chassis are expected to narrow the operating losses at the unit.
Knight-Swift guided adjusted EPS of 36 to 42 cents for the third quarter, which bracketed Yahoo Finance’s consensus estimate of 38 cents at the time of the print.
It didn’t provide a fourth-quarter outlook because of uncertainty around U.S. tariff policy.
