This trucking company handily beat analysts’ earnings estimates, and forecasts are for double-digit growth this year.
Knight-Swift Transportation Holdings (KNX)
From Cabot Undervalued Stocks Advisor
Knight-Swift Transportation Holdings (KNX) is a new truckload carrier formed from the September 2017 merger between Knight Transportation and Swift Transportation Company.
The company reported a strong fourth quarter 2017 earnings beat. Adjusted earnings per share (EPS) were $0.52 when analysts were expecting $0.41 EPS. Revenue came in on target, expenses came in below estimates and operating income came in much higher than expected. Full-year 2017 EPS rose 17.9%. Analysts are expecting EPS to grow another 52.2% in 2018, and the P/E is 22.9.
A driver shortage continues to plague the industry. Capital expenditures are now expected to be higher in 2018 than previously thought. Company management made bullish statements regarding synergies between the two merged companies and prospects for 2018, including price increases.
As a reminder, the reason that I buy stocks in companies that have recently merged is that the market tends to be unusually cautious when estimating future earnings growth at the new entity. Therefore, if the earnings estimates are attractive, I’m going to assume that the real numbers will be even better.
Increased profitability is coming from cost controls at Swift and industry-wide price increases. Driver recruitment remains problematic. The stock surged last week after the earnings release. Buy on pullbacks.
Crista Huff, Cabot Undervalued Stocks Advisor, www.cabotwealth.com, 978-745-5532, February 6, 2018