Freight delivery company Knight-Swift Transportation (NYSE:KNX) fell short of the market’s revenue expectations in Q4 CY2024, with sales falling 3.5% year on year to $1.86 billion. Its non-GAAP profit of $0.36 per share was 10.1% above analysts’ consensus estimates.
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Knight-Swift Transportation (KNX) Q4 CY2024 Highlights:
- Revenue: $1.86 billion vs analyst estimates of $1.88 billion (3.5% year-on-year decline, 1% miss)
- Adjusted EPS: $0.36 vs analyst estimates of $0.33 (10.1% beat)
- Adjusted EBITDA: $256.2 million vs analyst estimates of $284.3 million (13.7% margin, 9.9% miss)
- Adjusted EPS guidance for Q1 CY2025 is $0.31 at the midpoint, above analyst estimates of $0.30
- Operating Margin: 4.2%, up from 0.9% in the same quarter last year
- Market Capitalization: $8.95 billion
Company Overview
Covering 1.6 billion loaded miles in 2023 alone, Knight-Swift Transportation (NYSE:KNX) offers less-than-truckload and full truckload delivery services.
Ground Transportation
The growth of e-commerce and global trade continues to drive demand for shipping services, especially last-mile delivery, presenting opportunities for ground transportation companies. The industry continues to invest in data, analytics, and autonomous fleets to optimize efficiency and find the most cost-effective routes. Despite the essential services this industry provides, ground transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Thankfully, Knight-Swift Transportation’s 8.9% annualized revenue growth over the last five years was decent. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Knight-Swift Transportation’s recent history shows its demand slowed as its revenue was flat over the last two years. We also note many other Ground Transportation businesses have faced declining sales because of cyclical headwinds. While Knight-Swift Transportation’s growth wasn’t the best, it did perform better than its peers. 
This quarter, Knight-Swift Transportation missed Wall Street’s estimates and reported a rather uninspiring 3.5% year-on-year revenue decline, generating $1.86 billion of revenue.
Looking ahead, sell-side analysts expect revenue to grow 4.6% over the next 12 months. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below the sector average.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Knight-Swift Transportation has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 9.8%, higher than the broader industrials sector.
Looking at the trend in its profitability, Knight-Swift Transportation’s operating margin decreased by 8.8 percentage points over the last five years. Even though its historical margin is high, shareholders will want to see Knight-Swift Transportation become more profitable in the future.
In Q4, Knight-Swift Transportation generated an operating profit margin of 4.2%, up 3.2 percentage points year on year. The increase was encouraging, and since its operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as marketing, R&D, and administrative overhead.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Sadly for Knight-Swift Transportation, its EPS declined by 13.3% annually over the last five years while its revenue grew by 8.9%. This tells us the company became less profitable on a per-share basis as it expanded.
We can take a deeper look into Knight-Swift Transportation’s earnings to better understand the drivers of its performance. As we mentioned earlier, Knight-Swift Transportation’s operating margin improved this quarter but declined by 8.8 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Knight-Swift Transportation, its two-year annual EPS declines of 54.1% show it’s continued to underperform. These results were bad no matter how you slice the data.
In Q4, Knight-Swift Transportation reported EPS at $0.36, up from $0.09 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Knight-Swift Transportation’s full-year EPS of $1.06 to grow 88.6%.
Key Takeaways from Knight-Swift Transportation’s Q4 Results
It was encouraging to see Knight-Swift Transportation beat analysts’ EPS expectations this quarter. We were also glad its EPS guidance for next quarter came in higher than Wall Street’s estimates. On the other hand, its EBITDA missed significantly, and its revenue fell slightly short of Wall Street’s estimates. Overall, this was a mixed quarter. However, the market seems to be focused on the positive aspect, especially the strong earnings guidance. The stock traded up 5.5% to $58.01 immediately following the results.
Big picture, is Knight-Swift Transportation a buy here and now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
