Jefferies Initiates Coverage On Knight Transportation With A Hold Rating

Jefferies has initiated coverage with a Hold rating and a $19 PT. Jefferies thinks Knight Transportation KNX can continue to upside consensus for the next 1-2 quarters. Jefferies' proprietary TL revenue index suggests YoY revenue growth reaccelerated for the TLs in November following the widely-discussed pause in September and October. We believe KNX's loads and yields will come under pressure toward mid-2011, with 2Q11 and 3Q11 consensus expectations too high for KNX and across the group. We forecast flattish industry-wide TL loads in 2011e and industry-wide TL yields up 1-3%. In addition to risk to mid-2011 estimates, group valuations and sentiment suggest the TLs are "consensus buys", which is rarely a good time to be the new money. Jefferies does expect the company, as well as the TLs overall, to beat 4Q consensus expectations. However, potential upside in the shares out of the report appears to be less than the 15% Jefferies' seeks for a Buy rating. KNX closed Thursday at $54.49