Company Reports

Before its 2017 merger with Swift Transportation, Knight Transportation was the 12th-largest full-truckload carrier in the United States, with a history of exceptional execution, including average return on invested capital in the low teens—an unusual accomplishment in trucking. Knight's long-standing laser focus on network efficiency has served it well; its legacy operating ratio, or OR, (expenses/revenue, excluding fuel) averaged in the mid-80% range before the Swift deal, versus an industry average that traditionally exceeds 90%.

Diversified trucking and logistics specialist Knight-Swift’s first-quarter revenue-before-fuel grew 11% year over year. The increase was driven by the July 2023 U.S. Xpress acquisition and organic LTL-segment growth. Otherwise, the operating backdrop for the for-hire truckload, truck brokerage, and intermodal operations continued to face lackluster retailer restocking and abundant TL-market capacity, which has weighed heavily on spot and contract pricing for more than a year. Severe winter weather also pressured results.

Before its 2017 merger with Swift Transportation, Knight Transportation was the 12th-largest full-truckload carrier in the United States, with a history of exceptional execution, including average return on invested capital in the low teens—an unusual accomplishment in trucking. Knight's long-standing laser focus on network efficiency has served it well; its legacy operating ratio, or OR, (expenses/revenue, excluding fuel) averaged in the mid-80% range before the Swift deal, versus an industry average that traditionally exceeds 90%.

Before its 2017 merger with Swift Transportation, Knight Transportation was the 12th-largest full-truckload carrier in the United States, with a history of exceptional execution, including average return on invested capital in the low teens—an unusual accomplishment in trucking. Knight's long-standing laser focus on network efficiency has served it well; its legacy operating ratio, or OR, (expenses/revenue, excluding fuel) averaged in the mid-80% range before the Swift deal, versus an industry average that traditionally exceeds 90%.

Diversified trucking and logistics specialist Knight-Swift’s fourth-quarter revenue-before-fuel increased 11% year over year, primarily due to the U.S. Xpress acquisition in July and higher less-than-truckload, or LTL, revenue. U.S. Xpress and LTL share gains aside, the operating backdrop for the for-hire trucking, intermodal, and brokerage operations remains challenged on lackluster retailer restocking and the swing to excess truckload-market capacity, which has driven a material correction in TL spot and contract pricing over the past year. On the positive side, pricing conditions have at least stabilized.

Before its 2017 merger with Swift Transportation, Knight Transportation was the 12th-largest full-truckload carrier in the United States, with a history of exceptional execution, including average return on invested capital in the low teens—an unusual accomplishment in trucking. Knight's long-standing laser focus on network efficiency has served it well; its legacy operating ratio, or OR, (expenses/revenue, excluding fuel) averaged in the mid-80% range before the Swift deal, versus an industry average that traditionally exceeds 90%.

Diversified trucking and logistics specialist Knight-Swift Transportation’s third-quarter revenue before fuel increased 8% year over year, primarily due to the U.S. Xpress acquisition in July and higher less-than-truckload revenue. But the operating backdrop for the for-hire trucking, intermodal, and brokerage operations remains challenged on scant retailer restocking and the swing to excess truckload market capacity, which has driven a material correction in truckload spot and contract pricing.

Before its 2017 merger with Swift Transportation, Knight Transportation was the 12th-largest full-truckload carrier in the United States, with a history of exceptional execution, including average return on invested capital in the low teens—an unusual accomplishment in trucking. Knight's long-standing laser focus on network efficiency has served it well; its legacy operating ratio, or OR, (expenses/revenue, excluding fuel) averaged in the mid-80% range before the Swift deal, versus an industry average that traditionally exceeds 90%.

Diversified trucking and logistics specialist Knight-Swift Transportation’s decline in revenue before fuel accelerated in the second quarter, at 18% year over year. Revenue had swung negative in the first quarter following robust growth throughout 2021 and most of 2022, rooted in the pandemic-driven freight surge. Retailers have been destocking elevated inventories, and industrial end markets had softened by the end of 2022, pressuring volume across the board. Also, truckload spot and contract rates are correcting meaningfully (although less-than-truckload pricing is holding up better) as truckload capacity has loosened significantly. Second-quarter revenue came in short of our forecast for the legacy Knight and U.S. Xpress operations (acquired July 1), but the overall trucking downturn is not unexpected; we'd already been baking in a pullback this year.

Before its 2017 merger with Swift Transportation, Knight Transportation was the 12th-largest asset-based full-truckload carrier in the United States, with a history of exceptional execution, including average ROICs in the low teens—an unusual accomplishment in trucking. Knight's long-standing laser focus on network efficiency has served it well; its legacy operating ratio, or OR, (expenses/revenue, excluding fuel) averaged in the mid-80% range before the Swift deal, versus an industry average that traditionally exceeds 90%.

Diversified trucking and logistics specialist Knight-Swift's first quarter revenue-before-fuel fell 10% year over year. Recall revenue swung negative last quarter following exceptional growth throughout 2021 and most of 2022. In short, retail-sector restocking has retrenched on elevated inventory levels, and industrial end markets started softening by the end of 2022, thus pressuring volumes across the board. Also, truckload spot rates corrected meaningfully throughout 2022 and contract pricing is now correcting (albeit LTL pricing is holding up better) as the truckload capacity crunch has dissipated. Overall, the current trucking downcycle is not unexpected and we've already been baking in a pullback in 2023.

Before its 2017 merger with Swift Transportation, Knight Transportation was the 12th-largest asset-based full-truckload carrier in the United States, with a history of exceptional execution, including average ROICs in the low teens—an unusual accomplishment in trucking. Knight's long-standing laser focus on network efficiency has served it well; its legacy operating ratio, or OR, (expenses/revenue, excluding fuel) averaged in the mid-80% range before the Swift deal, versus an industry average that traditionally exceeds 90%.

Diversified trucking and logistics specialist Knight-Swift agreed to acquire public truckload peer U.S. Xpress for $324 million (equity value) in a mostly cash deal. With an enterprise value near $800 million, the deal carries an EV/EBITDA multiple of more than 13 times our own 2023 estimate for U.S. Xpress. That said, the multiple could be closer to 5 to 6 times our preliminary 2024 EBITDA estimate for U.S. Xpress, which incorporates a better trucking backdrop and initial synergies. Following the transaction, Knight's pro forma leverage could exceed 1.7 times EBITDA, though free cash generation should gradually bring that down. Management expects the deal to close by early third quarter.

Before its 2017 merger with Swift Transportation, Knight Transportation was the 12th-largest asset-based full-truckload carrier in the United States, with a history of exceptional execution, including average ROICs in the low teens—an unusual accomplishment in trucking. Knight's long-standing laser focus on network efficiency has served it well; its legacy operating ratio, or OR, (expenses/revenue, excluding fuel) averaged in the mid-80% range before the Swift deal, versus an industry average that traditionally exceeds 90%.

Diversified trucking and logistics specialist Knight-Swift’s fourth-quarter revenue-before-fuel swung to a 10% year-over-year decline—it was up 9% last quarter and more than 43% in the first half. The general theme is that retailer-sector restocking has dried up (high inventory levels) and industrial end markets are softening, thus pressuring volumes across the board. Also, truckload spot rates corrected meaningfully throughout 2022 and contract pricing is now starting to ease, albeit less-than-truckload, or LTL, pricing is holding up better. None of this is a surprise and we've already been baking in a pullback in 2023, though revenue came in shy of our forecast as conditions deteriorated faster than we thought.

Before its 2017 merger with Swift Transportation, Knight Transportation was the 12th-largest asset-based full-truckload carrier in the United States, with a history of exceptional execution, including average ROICs in the low-teens--an unusual accomplishment in trucking. Knight's long-standing laser focus on network efficiency has served it well given the asset-intensive nature of trucking. Its legacy operating ratio, or OR, (expenses/revenue, excluding fuel surcharges) averaged in the mid-80% range before the Swift deal, versus an industry average that traditionally exceeds 90%.

Diversified trucking and logistics specialist Knight-Swift’s third-quarter revenue-before-fuel grew 16% year over year (it was up 49% last quarter). Although growth eased materially, overall operating trends didn't deviate drastically from our expectations. We've been expecting easing retail end-market demand and a pullback in truckload spot activity and rates to flow through results, with LTL pricing holding up slightly better in the near term; and that's largely what's happening. In fact, TL spot conditions have been normalizing off historic highs throughout 2022, and we still expect industrywide contract rates (especially for TL and brokerage) to flip negative on a year-over-year basis by first-quarter 2023.

Before its 2017 merger with Swift Transportation, Knight Transportation was the 12th-largest asset-based full-truckload carrier in the United States, with a history of exceptional execution, including average ROICs in the low-teens--an unusual accomplishment in trucking. Knight's long-standing laser focus on network efficiency has served it well given the asset-intensive nature of trucking. Its legacy operating ratio (expenses/revenue, excluding fuel surcharges) averaged in the mid-80% range before the Swift deal, versus an industry average that traditionally exceeds 90%.

Before its 2017 merger with Swift Transportation, Knight Transportation was the 12th-largest asset-based full-truckload carrier in the United States, with a history of exceptional execution, including average ROICs in the low-teens--an unusual accomplishment in trucking. Knight's long-standing laser focus on network efficiency has served it well given the asset-intensive nature of trucking. Its legacy operating ratio (expenses/revenue, excluding fuel surcharges) averaged in the mid-80% range before the Swift deal, versus an industry average that traditionally exceeds 90%.

Diversified trucking and logistics specialist Knight-Swift’s second-quarter revenue-before-fuel grew 40% year over year (it was up 49% last quarter). Despite easing truckload spot rates, revenue growth exceeded our forecast on strong contract pricing gains and fuel surcharge noise. Relative to the year-ago period, revenue benefitted from the firm’s LTL-carrier acquisitions, strong underlying freight demand, and the tight capacity backdrop, which has driven up core pricing across all segments.