• Revenue Excluding Fuel Surcharge: Decreased by 0.9% year over year.
• Adjusted Operating Income: Improved by 127% or $59.4 million year over year.
• GAAP Earnings Per Diluted Share: $0.43 for Q4 2024.
• Adjusted EPS: $0.36 for Q4 2024.
• Consolidated Adjusted Operating Ratio: 93.7%, improved by 350 basis points year over year.
• Truckload Revenue Excluding Fuel Surcharge: Decreased 4.4% year over year.
• Revenue Per Tractor: Grew 1.7% year over year.
• LTL Revenue Excluding Fuel Surcharge: Increased 20.2% year over year.
• Logistics Revenue: Increased 2.1% year over year.
• Intermodal Revenue: Increased 4.9% year over year.
• All Other Segments Revenue: Declined 36.4% year over year.
• Adjusted EPS Guidance for Q1 2025: $0.29 to $0.33.
• Adjusted EPS Guidance for Q2 2025: $0.46 to $0.50.

• Warning! GuruFocus has detected 8 Warning Signs with KNX.

Release Date: January 22, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Knight-Swift Transportation Holdings Inc (NYSE:KNX) reported a 127% year-over-year improvement in adjusted operating income for the fourth quarter of 2024.
• The company has strategically deployed capital via acquisitions to enhance growth and margin improvement in both truckload and LTL segments.
• Knight-Swift Transportation Holdings Inc (NYSE:KNX) has successfully integrated DHE into its LTL network, expanding its reach and capturing new volumes.
• The logistics segment saw a 12.3% improvement in revenue per load year-over-year, indicating strong market recovery.
• The intermodal business posted a year-over-year revenue increase for the second consecutive quarter, driven by a 10.2% increase in load count.

Negative Points

• Revenue excluding fuel surcharge decreased slightly by 0.9% year-over-year, indicating challenges in maintaining top-line growth.
• The LTL segment experienced a 54.9% decline in adjusted operating income year-over-year due to start-up costs and system integration expenses.
• The company faced a $6.5 million increase in net interest expense and a $5.4 million decrease in gain on sale year-over-year.
• U.S. Xpress, part of Knight-Swift Transportation Holdings Inc (NYSE:KNX), continues to operate below market rates, impacting overall profitability.
• The company incurred an $8.1 million impairment charge and a $36.6 million benefit for a mark-to-market adjustment related to acquisition obligations.

Q & A Highlights

Q: Can you provide more perspective on the assumptions for the second quarter guidance, particularly regarding LTL and contract rates? A: Adam Miller, CFO, explained that the lift from Q1 to Q2 is expected due to normal seasonality in the truckload business and favorable bid season outcomes for contractual rates. LTL improvements are anticipated as DHE integration costs are put behind, and volume density in new facilities increases. Logistics is expected to remain stable, while intermodal is projected to turn positive in margins by Q2.

Q: Are you seeing early bid season benefits in truckload, and how are you balancing structural cost steps? A: Adam Miller noted that the bid season is following its normal pattern, with early indications showing positive rate trends. The company is focusing on maintaining cost discipline and improving operating costs per mile. They expect gradual margin improvement through rate progress and cost management.

Q: Given recent data points, is the strength in the market sustainable, or is it just seasonal? A: Adam Miller stated that it's too early to draw conclusions from recent data due to weather disruptions. The company is setting guidance based on current market conditions and will adjust if sustained strength is observed. They are monitoring industry data like rejections and capacity availability.

Q: How did truckload earnings improve despite a revenue decline from Q3 to Q4, and what are the priorities for 2025? A: Adam Miller explained that despite revenue decline due to holiday disruptions, yield improvements and cost management led to better margins. For 2025, the focus is on leveraging truckload yields and gaining intermodal market share, with pricing being a significant lever for truckload.

Q: What are the cost improvement opportunities in truckload for 2025, and how do they affect margins? A: Andrew Hess highlighted improvements in asset utilization, overhead cost reductions, and variable cost management. These initiatives are expected to sustain cost improvements and contribute to margin expansion. The company aims to return to historical margin performance across cycles.

Q: How are you balancing yield versus shipment growth in LTL, and are there positive market indicators? A: Adam Miller emphasized maintaining disciplined pricing while growing volume to optimize new terminals. The company is seeing interest from customers in new territories, with mid-single-digit pricing increases expected. They aim to leverage new facilities for volume growth without discounting prices.

Q: What are your free cash flow expectations for the year, and how will it be allocated? A: Brad Stewart indicated that while specific free cash flow guidance isn't provided, improvements in earnings and manageable CapEx are expected. The focus will be on deleveraging and opportunistic buybacks, with LTL growth being a priority for capital allocation.

Q: Can you update on U.S. Xpress and its margin improvement potential? A: Adam Miller discussed network overhauls and cost initiatives at U.S. Xpress, with expectations for margin improvements as market rates rise. Andrew Hess added that significant cost synergies have been achieved, and further improvements are anticipated in market rates, truck count, and dedicated fleet growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.