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Freight Demand Weakness Hurts Knight-Swift, Liquidity Aids


We recently issued an updated report on Knight-Swift Transportation Holdings Inc. KNX.

Low freight demand along with excess truckload capacity, intense competition in the intermodal market and coronavirus-induced consequences are headwinds. However, the company’s liquidity position looks impressive.

Trucking revenues declined 5.1% year over year during the March end quarter. With revenues from the trucking segment constituting the bulk of the company’s revenues, the top line declined 6.6% during the first three months of 2020.

Moreover, dismal freight scenario stemming from the coronavirus pandemic is not likely to improve in the subsequent quarterly results. Revenues per loaded mile are anticipated to be negative in the second quarter as was the case in the March quarter.

The outbreak is expected to delay shipments for a significant part of 2020. Owing to uncertainties caused by the pandemic, the company suspended its previously announced guidance for 2020.

Meanwhile, Knight-Swift is being aided by efficient cost-control measures and enhanced safety procedures. Notably, total operating expenses declined 6% year over year in first-quarter 2020.

The company’s strong liquidity position looks impressive. Knight-Swift’s total debt-to-capital ratio, which is an indicator of a company's leverage, stood at 0.08 at the end of first-quarter 2020 as well as at 2019-end. The reading compares favorably with the industry’s figure of 0.14 for both the periods. Moreover, Knight-Swift’s cash and cash equivalents stood at $168 million at the end of the March quarter compared with short-term debt figure of $75 million. This implies that the company has sufficient cash to meet its short-term debt obligations.

Zacks Rank & Key Picks

Knight-Swift carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the Zacks Transportation sector are Scorpio Tankers Inc. STNG, Teekay Tankers Ltd. TNK and Nordic American Tankers Limited NAT. Scorpio Tankers sport a Zacks Rank #1 (Strong Buy), while Nordic American Tankers and Teekay Tankers carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Scorpio Tankers’ current-year earnings has been revised upward in excess of 100% in the past 60 days.

The Zacks Consensus Estimate for Teekay Tanker’s current-year earnings has been revised upward by 35.6% in the past 60 days.

The Zacks Consensus Estimate for Nordic American Tankers’ current-year earnings has been revised upward by 14.1% in the past 60 days.

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