Knight-Swift Cuts Earnings Outlook Again

Apparently earnings estimates for the truckload (TL) carriers are still too high. At least that's the case for the nation's largest carrier, Knight-Swift Transportation Holdings Inc. KNX.

In a press release after the market close, the Phoenix-based company stated that it was lowering its fourth quarter 2019 adjusted earnings-per-share (EPS) guidance to a range of $0.50 to $0.52, from its previously lowered guidance range of $0.62 to $0.65.

Further, Knight-Swift plans to revise its first quarter 2020 guidance of $0.42 to $0.46 and provide initial second quarter 2020 guidance when it reports fourth quarter earnings in January.

The current fourth quarter EPS estimate is $0.62, and the first quarter 2020 estimate is $0.42.

The company blamed an oversupply of TL capacity and a "muted" sequential improvement from third to fourth quarter. The result was fewer seasonal project freight opportunities that normally carry a high yield. As such, the carrier said that "rate increases were less than anticipated, leading to reduced revenues and lower than expected operating income."

While many analysts are calling for a meaningful capacity correction in 2020, it may not be the sharp, quick turn some are hoping for.

From the press release, "We believe capacity rationalization is underway as evidenced by trucking business failures, class 8 new truck orders below the replenishment rate, further weakening of class 8 used tractor values, and contraction in trucking employment."

"We expect the rate of capacity rationalization to accelerate with additional factors that include the mild freight seasonality that is typical with first quarters, significant insurance cost inflation, and the new regulatory introduction of the CDL Drug and Alcohol Clearinghouse," the release concluded.

Shares of KNX are off 3.6% in after-hours trading, according to Seeking Alpha.

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