Knight-Swift Transportation shares gained more than 10% as its third quarter results outperformed Street expectations and Bank of America analysts bumped up their price target on the company.
The analysts increased their price target on the Phoenix, Arizona-headquartered provider of truckload and logistics services to US$65 from US$61 and reiterated their ‘Buy’ rating.
Knight-Swift shares were up 10.6% at US$50.75 shortly before noon on Friday.
On the company's 3Q results, the analysts pointed out that the beat was driven by the accelerated integration of its US Xpress (USX) acquisition as it lowered USX’s spot exposure from 45% to 15%.
“Although the trucking backdrop remained muted, it decreased USX's cost per mile in the mid-single digit range and increased rates at a low-single digits pace from 2Q 2023,” they wrote in a note to clients.
‘As it achieves synergies ahead of schedule, Knight-Swift sees a smaller negative earnings per share (EPS) impact from USX in the second half (negative $0.10 in 3Q and about negative $0.05 in 4Q, from its prior second half target of a negative $0.25 to negative $0.30 impact).”
They noted that, given Knight-Swift’s previous success in integrating Swift, they view its path to ramp USX returns as a positive catalyst to drive earnings leverage from its $215 2023 EPS baseline.
They increased their 2023, 2024 and 2025 EPS estimates by 5%, 6%, and 13%, to $2.15, $3.50, and $4.80, from $2.05, $,3.30, and $4.25, respectively.
“We remain positive on its position as a leading operator in the truckload group and expect it to benefit from an inflection in the truck cycle,” the analysts concluded.
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