Knight-Swift Transportation cut its earnings guidance for the first quarter, citing mostly company-specific headwinds. The update sent shares more than 3% lower in after-hours trading on Thursday.
Adjusted earnings per share are now expected to range from 8 to 10 cents in the first quarter. That’s well below the company’s prior guidance of 28 to 32 cents and the consensus estimate of 25 cents at the time of the print.
The company expects an 8-cent-per-share hit from negative claims development in its less-than-truckload unit. Severe weather in January and surging fuel prices in March will negatively impact results by 5 to 6 cents per share. A value-added tax reversal in its Mexico business will cost it 2 cents per share.
It also expects a 5-cent headwind as some warehousing project business has been pushed into the second and third quarters due to poor weather.
Large carriers have ample fuel recovery mechanisms in place, but a one-week lag leads to short-term margin compression when prices are on the way up. Retail fuel prices increased sequentially in the last 11 weeks of the first quarter, moving 56% higher (nearly $2 per gallon) from trough to peak. Also, surcharges don’t typically cover deadhead, out-of-network miles or idle time.
“While the winter weather negatively impacted volumes and operating costs more than typical for a first quarter, it also exposed the reduction in truckload capacity to all stakeholders, which is very meaningful for ongoing bid activity,” CEO Adam Miller said in a news release. “Similarly, the rapid increase in fuel costs was a headwind to earnings in March, but we believe this will add to the existing downward trend in supply in the truckload industry.”
Knight-Swift (NYSE: KNX) issued second-quarter adjusted EPS guidance of 45 to 49 cents, which bracketed the 47-cent consensus estimate.
Miller said the market is continuing to tighten and customers are seeing value in the size of its one-way fleet. He expects results to improve as “new pricing and volume awards” take hold, and as it continues to cut costs. He also noted an expectation for “more spot and project opportunities than we have seen in recent years.”
“All things considered, we are more optimistic about the earnings opportunity for our businesses over the next several quarters than we were three months ago,” Miller said.
The company reports first-quarter results after the market closes on Wednesday.
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