On Thursday, BofA Securities adjusted its financial outlook for Knight Transportation (NYSE: NYSE:KNX), reducing the price target from $58.00 to $54.00, while maintaining a Buy rating on the stock. The revision follows Knight-Swift Transportation's announcement of significantly lowered earnings guidance for the first and second quarters of 2024, marking the fourth such adjustment in the past year.
The transportation company revised its earnings per share (EPS) forecast for 2023 to a range of $3.35 to $3.55 in April 2023, a decrease from the previously projected $4.05 to $4.25. This change reflects ongoing challenges, including rate pressures and issues within its insurance business. Consequently, BofA Securities has also reduced its 2024 EPS estimate for Knight Transportation to $1.45, down from $2.15.
Knight-Swift Transportation anticipates its adjusted EPS for the first quarter of 2024 to be between $0.11 and $0.12, a significant drop from the earlier forecast of $0.37 to $0.41, and below BofA's previous estimate of $0.32.
This includes an $0.08 per share loss from the insurance segment, which the company exited in the first quarter of 2024. For the second quarter, the company now expects adjusted EPS to be in the range of $0.26 to $0.30, down from the previously estimated $0.53 to $0.57, aligning with BofA's revised prediction of $0.30.
The lowered guidance reflects the sustained pressure from a protracted freight downcycle. Knight-Swift Transportation has experienced greater-than-expected rate pressure at the beginning of the bid season, as noted in similar commentary from J.B. Hunt and feedback from shippers in the BofA Truck Shipper Survey. The company has reportedly lost volume due to its reluctance to agree to prices it deems unsustainable, resulting in a shift towards more spot market transactions.
InvestingPro Insights
As Knight Transportation (NYSE: KNX) navigates through a challenging period, marked by reduced earnings guidance and rate pressures, it is important for investors to consider key financial metrics and analyst insights. According to InvestingPro Data, Knight Transportation has a market cap of approximately $7.81 billion and is currently trading at a high earnings multiple, with a P/E ratio of 35.85. Despite a slight decrease in revenue over the last twelve months as of Q1 2023 by -3.86%, the company has shown a quarterly revenue growth of 10.8% in Q1 2023, indicating some resilience in its operations.
InvestingPro Tips suggest that Knight Transportation has maintained dividend payments for 21 consecutive years and has raised its dividend for 4 consecutive years, showcasing a commitment to returning value to shareholders. Additionally, analysts have noted that the stock is currently in oversold territory based on the RSI, which could indicate a potential buying opportunity for long-term investors. However, with 10 analysts revising their earnings downwards for the upcoming period, caution is advised.
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