Knight-Swift grappling with tariff-spooked customers in bid season

Knight-Swift Transportation said some customers are delaying decision making and others are drawing down inventories as the market awaits some resolution on U.S. trade policy. The post Knight-Swift grappling with tariff-spooked customers in bid season appeared first on FreightWaves.

Apr 24, 2025 - 02:46

Knight-Swift grappling with tariff-spooked customers in bid season

Knight-Swift Transportation lowered its second-quarter outlook on Wednesday and decided against issuing third-quarter guidance as “customers are grappling with a fluid trade policy situation,” resulting in delayed decision making for some while others “manage inventories more tightly.”

The Phoenix-based transportation and logistics provider beat first-quarter expectations, reporting adjusted earnings per share of 28 cents, 4 cents better than the consensus estimate and 16 cents higher year over year. However, analysts lowered earnings expectations for trucking companies as the quarter closed and threats around Liberation Day tariffs ramped.

Knight-Swift’s (NYSE: KNX) first-quarter result was below management’s guidance range of 29 to 33 cents and benefited from gains on equipment sales of $15.5 million, an $8.8 million y/y increase, or a 4-cent tailwind.

Table: Knight-Swift’s key performance indicators – Consolidated

CEO Adam Miller told analysts on a Wednesday call that the first quarter had positive momentum to start but faded as trade uncertainty increased in March. He said some customers importing from China have taken a wait-and-see approach while others canceled orders to avoid being caught on the wrong side of a rapidly changing tariff policy.

Miller said truckload demand in the first half of April was on par with the first quarter’s exit rate.

Second-quarter adjusted EPS guidance was widened and lowered to a range of 30 to 38 cents from 46 to 50 cents. (The consensus estimate was 40 cents at the time of the print.) The company begged off a third-quarter guide but said it will provide one when it reports second-quarter results in July. At that time, it will decide on issuing guidance two quarters out.

Table: Knight-Swift’s key performance indicators – Truckload

The TL unit reported a 4% y/y revenue decline to $1.05 billion (excluding fuel surcharges). Average tractors in service were down 6% y/y, but revenue per tractor increased 2% as the carrier continues to rationalize the fleet count to boost utilization rates. Miles per tractor were up y/y for a seventh consecutive quarter.

The company said it’s getting low- to mid-single-digit contractual rate increases in the current bid season but acknowledged the market has weakened over the past few weeks. Revenue per loaded mile (excluding fuel) in the first quarter was up 1% y/y, the first y/y increase in 10 quarters. Knight-Swift still expects to see positive rate results this year but noted that several bids will be negotiated in the second quarter with some of its largest customer bids coming due in the third quarter.

SONAR: The National Truckload Index (linehaul only – NTIL) *for 2025 (blue shaded area), 2024 (green line) and 2023 (pink line)*. The NTIL is based on an average of booked spot dry van loads from 250,000 lanes. The NTIL is a seven-day moving average of linehaul spot rates excluding fuel. To learn more about SONAR, click here.

The TL unit reported a 95.6% adjusted operating ratio (inverse of operating margin), which was 170 basis points better y/y. U.S. Xpress saw an operating profit for the first time since it was acquired in July 2023.

Management remains focused on lowering overhead costs and selling underutilized equipment, taking advantage of a still-decent tractor resale market.

The top end of the second-quarter guidance assumes a limited seasonal volume uptick with some weakness in West Coast container imports during May. The bottom end of the range assumes a “reduction in imports occurs in May and June and causes some deterioration in demand and an absence of seasonality.”

Table: Knight-Swift’s key performance indicators – Less-than-truckload

The less-than-truckload segment reported a 27% y/y revenue increase to $305 million. Shipments per day increased 24% and revenue per shipment (excluding fuel) was up 7%. The bulk of the growth was due to an acquisition.

Contractual renewals averaged mid-single-digit increases in the period.

The OR deteriorated 420 bps y/y to 94.2%. Startup costs at new terminals along with lingering integration costs were headwinds. Knight-Swift added seven new locations in the quarter after onboarding 51 last year. It’s planning for nine net additions in the back half of the year.

Momentum is building in the segment. Daily shipments were up 30% y/y in March and the adjusted OR was 90.6% during the month. The company said M&A, particularly in the Northeast, will likely be pushed out to 2026.

“This is a year of growing into what we have – improving our top line as well as improving our margin profile in the business,” Miller said.

The unit is expected to see a low-90% OR in the second quarter.

Knight-Swift’s logistics unit reported a 12% y/y revenue increase, all of which was attributable to an increase in revenue per load. The adjusted OR improved 160 bps y/y to 95.5% as the gross profit margin improved 130 bps.

The intermodal segment booked an operating loss for an eighth consecutive quarter.

Shares of KNX were off 3% in after-hours trading on Wednesday.