Truckload segment revenue increased 2.8% to $1.1 billion from $1.07 billion. Operating income increased 96.3% to $89.1 million from $45.4 million. (John Tetzlaff/Getty Images)
key takeaways:
- Knight Swift reported strong second-quarter results as pricing, utilization and profitability increased strongly in the supply-driven truck market, executives told investors July 22.
- Net income increased 26.1% to $43.2 million and revenue increased 12.6% to $2.1 billion as increased capacity drove rates and margins.
- Executives expect the market to continue to tighten and said the recent Supreme Court broker-liability decision could further tighten carrier capacity and create opportunities.
Knight-Swift Transportation Holdings reported supply-driven tightening in the truckload market contributed Second quarter results strong.
The freight market is becoming increasingly tight this year, with increased federal enforcement actions accelerating the existing decline in capacity. The market has struggled to recover in recent years due to a glut of drivers at previous freight-cycle peaks. Later, when demand weakened, the industry was left with excess capacity.
“The truck freight market has progressed rapidly over the past few months, with spot rates running well ahead of normal seasonality,” Knight-Swift CEO Adam Miller said during a call with investors on July 22. “This remains largely supply-driven, although signs of demand recovery are beginning to emerge.”
Miller said contractual bidding activity is becoming increasingly supportive, while tender rejection rates have climbed to levels not seen since 2021. He said Knight-Swift is well-positioned for a tough market because of its scale, pricing flexibility, cross-brand collaboration and driver-training programs.
“Furthermore, we believe demand for our truckload service offering is outpacing the market, as evidenced by our tender rejection rates that are approximately double the level of public indications,” Miller said. He said revenue per mile began to improve in the quarter as contract-rate gains at the beginning of the year were reflected in the bid price.
Connected: Knight-Swift reports net loss in first quarter due to improving market conditions
TD Cowen said in a report that it expects a cycle tailwind to build in the second half of the year. The company said margins improved due to stronger truckload positions driven by higher over-the-road usage and pricing. TD Cowen said these tailwinds on volume and mini-bid pricing opportunities should intensify in the second half.
TD Cowen Managing Director Jason Seidl said truckload revenue growth matches TD Cowen’s expectations as Knight-Swift goes through the early stages of a recovery.
“A tight market enabled KNX to increase utilization as contracts gradually move through the book,” Seidl said.
The report said supply dynamics remain the primary driver of the recovery, although strong demand could provide additional gains. It also expects driver wages to rise, although less rapidly than in the previous cycle.
Knight-Swift also used the investor call to address the decision in Montgomery v. Carib Transport II. The U.S. Supreme Court ruled that freight brokers are not protected by federal law from state lawsuits over claims of negligent hiring practices. This overturned the widely accepted interpretation in many states, placing greater responsibility on brokers. Miller expects the decision to tighten the market as marginal carriers shrink.
Miller said the decision should not increase Knight-Swift’s asset-based operating costs and could create future business opportunities.
He is already seeing the impact of the decision on insurance markets, including a significant reduction in capacity. He said insurers are also seeking to introduce exclusions regarding carrier-vetting practices in their policies.
Miller said customers remain generally optimistic and continue to discuss peak-season demand support.
“With market conditions tightening, it has become more challenging to recruit and retain quality drivers,” he said.
Knight-Swift reported that its own net income increased 26.1% to $43.2 million from $34.2 million. Revenue increased 12.6% to $2.1 billion from $1.86 billion. Consolidated operating ratio improved 110 basis points from last year to 95. Knight-Swift Chief Financial Officer Andrew Hayes said earnings improved primarily due to pricing and network-efficiency gains in asset-based businesses.
“Revenue excluding fuel surcharges in our truckload segment increased 2.8%,” Hayes said. “Rate improvement accelerated in June as recent bids began to take effect, with truckload revenue per load mile, excluding fuel surcharges, rising 8.4%.”
Section wise results
- Truckload segment revenue increased 2.8% to $1.1 billion from $1.07 billion. Operating income increased 96.3% to $89.1 million from $45.4 million.
- Less-than-truckload segment revenue declined 1.4% to $333 million from $337.7 million. Operating income increased 18.1% to $21.7 million from $18.4 million.
- Intermodal segment revenue increased 34.9% to $113.4 million from $84.1 million. Operating income returned to profitability at $653,000 from an operating loss of $3.4 million.
- Logistics segment revenue increased 8.9% to $139.7 million from $128.3 million. Operating income fell 31% to $3.83 million from $5.55 million.
Knight-Swift is ranked 8th on Transportation Topics’ top 100 largest for-hire carriers list in North America. The company is also ranked 31st on the Logistics TT100.
