Deutsche Bank Reports On Authorized Buybacks Of KNX

Deutsche Bank is maintaining its Hold rating and its $22 price target on Knight Transportation KNX following the new of an authorized buyback program announced by the company yesterday. According to Deutsche Bank, “Yesterday after the close, KNX announced a new 10 million share buyback authorization (which represents 12% of diluted shares outstanding) as well as a $0.06/share quarterly cash dividend payable on June 24, 2011 to shareholders of record on June 3, 2011. KNX plans to repurchase shares opportunistically based on its cash requirements and market conditions. Assuming KNX maintains roughly $20 million of cash on its balance sheet for working capital purposes (the company has $71.5 million of cash and short-term investments and no debt as of March 31, 2011), we estimate that company could repurchase 2.7 million shared (at 10% premium to yesterday's close of $17.32/share) immediately. We believe these purchases could drive roughly $0.03/share of earnings accretion in 2012, which would boost our price target by a $1. While we expect capital returned to shareholders in the form of buybacks, we expect the company to primarily reinvest the cash flows to expand its business by either buying tractors or making tuck-in acquisitions.” As mentioned above, KNX closed yesterday at $17.32.