Knight-Swift revenue reflects soft freight market

Knight-Swift Transportation Holdings Inc.’s first quarter revenue took a 10.4% hit compared to the first quarter of 2022.

Consolidated total revenue was $1.6 billion for the first quarter of 2023, according to a company earnings statement. Consolidated operating income was $144.8 million, which was 51.4% less compared to the same quarter last year.

For the truckload segment, Knight-Swift reported an adjusted operation ratio of 86.6%. Adjusted operating ratio refers to operation expenses, without fuel surcharge revenue or fuel purchase arrangements, expressed as a percentage of revenue.

There was an 8% year-over-year decrease in truckload revenue, excluding fuel surcharges. Profit was affected by large prior-year insurance claims totaling $8.5 million related primarily to an unfavorable jury verdict in the first quarter of 2023.

Phoenix-based Knight-Swift notes that it operates the largest full truckload fleet in North America.

The less-than-truckload segment produced an adjusted operating ratio of 85.7%, a 20-basis-point improvement year-over-year. The gain was credited to improvements in yields and efficiencies.

The logistics segment produced a gross margin of 19.8% while the load count decreased 19.8% year-over-year.

The company also noted its planned acquisition of U.S. Xpress Enterprises Inc. It was announced in March. It is now expected to close in early third quarter 2023.

“While the current freight environment continues to be challenging, we are already positioning ourselves to prepare for the impending freight recovery, including the announced transaction to acquire U.S. Xpress later this summer, for which we are uniquely qualified and experienced to meaningfully improve results through the next phase of the cycle,” David Jackson, Knight-Swift CEO, said in the earnings statement.

Weak demand has carried over

Demand proved worse than expected in the first quarter, Jackson said. The unusually soft demand in the fourth quarter continued into the first quarter of 2023.

The depressed import activity on the West Coast has affected freight volumes and made bids more competitive, he said.

“The absence of the typical seasonal uplift in March saw truckload spot rates drift lower to levels that we believe are below cash operating costs for a large portion of carriers, especially smaller and less-well-capitalized operators,” Jackson said in the earnings statement.

The company’s focus on cost control and improved revenue in its dedicated business has helped keep the truckload segment’s adjusted operating ratio in the mid-80s for the quarter, Jackson said.

The Knight-Swift LTL segment has performed well, he said, essentially holding revenue, operating income, and operating ratio flat as yield improvements and cost discipline offset the softer volume environment.

“We anticipate the general weakness in shipping demand will persist through the spring while ongoing rate pressure and cost inflation will continue to drive capacity from the market,” Jackson said. “We believe this rationalization of capacity, combined with the progress being made by shippers in their efforts to work down inventory levels, will lead to improved business conditions for carriers in the back half of 2023.”

In 2017, Knight Transportation (founded in 1990) merged with Swift Transportation (founded in 1966) to create Knight-Swift Transportation Holdings Inc.

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