Citi has updated the financial outlook for Knight Transportation (NYSE: NYSE:KNX), increasing the price target slightly to $56.00 from $55.00, while maintaining a Neutral stance on the stock.
The adjustment follows Knight Transportation's third-quarter earnings report, where the company posted an adjusted earnings per share (EPS) of $0.34, surpassing both Citi's and the Street's expectations by $0.02.
The reported earnings beat was attributed to factors below the line, as the company's revenue and operating ratio (OR) did not meet the estimates set by Citi and the Street.
Additionally, Knight Transportation provided its guidance for the fourth quarter of 2024 and the first quarter of 2025, projecting adjusted EPS in the range of $0.32-$0.36 and $0.29-$0.33, respectively.
These forecasts fall below Citi's previous estimates of $0.37 and $0.39, signaling persistent headwinds for truckload carriers.
Management at Knight Transportation expressed optimism about margin improvement opportunities as market conditions improve, indicating confidence that the worst of the weak freight market has passed. The company's strategic initiatives, such as expanding its national less-than-truckload (LTL) network and enhancing its truckload business, particularly with US Xpress, were highlighted as positive steps.
Despite the third-quarter performance not being particularly strong, Citi's outlook acknowledges Knight Transportation's strategic efforts. However, the firm cautions that significant earnings upside, which would require a substantial improvement in the freight market, may already be reflected in Knight Transportation's current stock price. s.
In other recent news, Knight-Swift Transportation Holdings Inc. reported third-quarter earnings that exceeded analyst expectations, despite falling short on revenue. The company's adjusted earnings per share were $0.34, surpassing the consensus estimate of $0.32, while the reported revenue was $1.88 billion, slightly missing the forecasted $1.91 billion.
Looking forward, Knight-Swift anticipates earnings per share for the fourth quarter of 2024 to land between $0.32 and $0.36, aligning with current analyst consensus. However, projections for the first quarter of 2025 are slightly lower, with earnings per share expected to range from $0.29 to $0.33, under the analyst estimate of $0.36.
Barclays has reiterated an Overweight rating on Knight Transportation, following the company's recent quarterly results. Despite challenges in the Truckload and Less-Than-Truckload segments, Knight-Swift is experiencing positive rate increases, with CEO Adam Miller anticipating contract renewals to be in the low-to-mid single-digit range for the upcoming bid season.
InvestingPro Insights
Knight Transportation's recent performance and future outlook can be further contextualized with real-time data from InvestingPro. The company's market capitalization stands at $8.54 billion, reflecting its significant presence in the transportation sector. Despite the challenges in the freight market, Knight has maintained a strong revenue growth, with an 11.57% increase over the last twelve months and an impressive 18.91% growth in the most recent quarter.
InvestingPro Tips highlight that Knight Transportation has raised its dividend for 4 consecutive years, demonstrating a commitment to shareholder returns even in a challenging market environment. This aligns with management's optimistic outlook on margin improvements and strategic initiatives mentioned in the article. However, it's worth noting that 11 analysts have revised their earnings downwards for the upcoming period, which correlates with the lower EPS guidance provided by the company for Q4 2024 and Q1 2025.
The company's P/E ratio of 126.44 suggests a high earnings multiple, which supports Citi's cautionary stance on the stock price potentially already reflecting significant earnings upside. Investors considering Knight Transportation should be aware that InvestingPro offers 8 additional tips for a more comprehensive analysis of the company's financial health and market position.
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