Knight-Swift Transportation Holdings Inc. (KNX) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals mixed signals: while there are positive developments such as improved revenue per load and cost reductions, there are also concerns like disappointing November volumes and unclear guidance. The Q&A highlights challenges in the LTL market and regulatory impacts, but also potential for margin improvement. The lack of robust Q1 outlook and management's evasiveness on specific guidance contribute to a neutral sentiment, indicating minimal stock movement.
Key Financial Performance
Truckload Revenue (excluding fuel surcharge) Declined by $125 million year-over-year. The decline was offset by cost-cutting measures, resulting in a $28 million increase in adjusted operating income for the segment.
Cost Per Mile (Truckload) Remained flat year-over-year despite a 3.6% decline in miles. This was achieved by overcoming inflation pressures.
LTL Revenue (excluding fuel surcharge) Increased by 7% year-over-year. Shipments per day grew by 2.1%, and revenue per hundredweight increased by 5%. Adjusted operating income decreased by 4.8%, and adjusted operating ratio increased by 60 basis points due to moderating demand.
Consolidated Revenue (excluding fuel surcharge) Decreased by 0.4% year-over-year. Adjusted operating income declined by 5.3% due to lighter truckload and LTL demand.
GAAP Earnings Per Diluted Share Loss of $0.04 for Q4 2025, compared to $0.43 in Q4 2024. The loss was primarily due to $52.9 million in noncash impairment charges.
Adjusted Earnings Per Share (EPS) $0.31 for Q4 2025, compared to $0.36 in Q4 2024. The decline was attributed to lighter demand in truckload and LTL segments.
Adjusted Operating Ratio (Consolidated) 94%, up 30 basis points year-over-year and 20 basis points sequentially.
Truckload Segment Revenue (excluding fuel surcharge) Declined by 2.4% year-over-year. Adjusted operating income declined by 10.7% due to a 3.3% decline in loaded miles. Revenue per loaded mile increased by 0.7% year-over-year.
LTL Segment Adjusted Operating Ratio Increased by 60 basis points year-over-year. This was due to shipment count growth lagging behind facility and door count growth.
Logistics Revenue Declined by 4.8% year-over-year. Volumes were down 1%, and revenue per load decreased by 4.1% due to mix changes. Gross margin declined by 180 basis points year-over-year.
Intermodal Revenue Declined by 3.4% year-over-year due to a 6% decrease in load count. Revenue per load increased by 2.8%, and adjusted operating ratio improved by 140 basis points year-over-year.
All Other Segments Revenue Increased by 17.7% year-over-year. Operating loss improved by 37.3%, driven by growth in warehousing and leasing businesses.
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Operating Highlights
AI and tech-enabled efficiency gains: Investments in internal development and external products to facilitate tech-enabled efficiency gains and better revenue capture, including through AI, are expected to begin yielding benefits in 2026.
LTL industry expansion: The company has been expanding its LTL network, growing facility count faster than shipment count over the past two years. The existing infrastructure has capacity to support annualized revenue of $2 billion.
Cost reduction in Truckload segment: Significant progress in cutting costs has driven year-over-year earnings growth despite lower revenue. Fixed cost reductions are expected to be permanent, positioning the company for better incremental margins as volumes and pricing recover.
Regulatory impact on capacity: Regulatory enforcement has reduced capacity in the truckload market, particularly affecting smaller carriers. This has led to a tightening market and improved spot rates.
Integration of Abilene Truckload brand: The Abilene Truckload brand was combined into the Swift business to improve efficiency and productivity by incorporating assets and freight flows into a more robust network.
Focus on one-way truckload market: The company is leveraging its industry-leading over-the-road capacity and trailer pool flexibility to capture opportunities in the tightening one-way truckload market.
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Risk or Challenges
Truckload Volumes: Truckload volumes were lower than expected due to a lack of broad-based seasonal demand and shorter seasonal project activity. This led to reduced revenue and operating income.
Secondary Equipment Market: Slowing equipment sales trends and falling average prices were observed, partially due to regulatory enforcement on smaller carriers. This impacted gains on sales and overall financial performance.
Inflation Pressures: Inflation pressures affected the Truckload business, although cost-cutting measures helped mitigate some of the impact.
LTL Shipment Growth: Lower demand environment and slower shipment growth weighed on margins, especially as facility and door count growth outpaced shipment growth.
Regulatory Enforcement: Regulatory enforcement on qualifications and safety standards caused disruptions, particularly affecting smaller carriers and the secondary equipment market.
Mexico Border Blockades: Blockades at the Mexico border negatively impacted productivity, especially for the TransMex division.
Cargo Theft: Increase in cargo theft, partly due to financial struggles and regulatory enforcement forcing operators out of business, added operational challenges and potential cost pressures.
Third-Party Carrier Capacity: Difficulty in sourcing third-party carrier capacity led to gross margin pressure in the Logistics segment.
Intermodal Load Count: Intermodal load count decreased by 6%, impacting revenue despite improvements in revenue per load.
Impairment Charges: $52.9 million in noncash impairment charges related to the combination of the Abilene Truckload brand into the Swift business negatively affected financial results.
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Guidance & Outlook
Truckload Market Conditions: The truckload market is expected to strengthen in 2026, driven by capacity reductions, regulatory enforcement, and improved market data trends. The company anticipates a return to mid-cycle margins in the Truckload segment as market conditions recover.
Cost Structure and Margins: The company has made significant progress in reducing costs, with most fixed cost reductions expected to be permanent. This positions the company for better incremental margins as volumes and pricing recover. Utilization improvements on the existing fleet are also expected to enhance margins.
Technology Investments: Investments in AI and other technologies are expected to drive efficiency gains and better revenue capture, with benefits anticipated to begin in 2026.
LTL Segment Growth: The LTL segment is expected to grow into its existing infrastructure, which has the capacity to support annualized revenue of $2 billion. A more deliberate pace of network expansion is planned to restore margins and improve operating leverage.
Regulatory and Market Developments: Regulatory enforcement and capacity erosion are expected to have a positive impact on the one-way truckload market. The company is monitoring market trends and is prepared to deploy capacity towards valuable opportunities as the landscape shifts.
Logistics Segment Outlook: The Logistics segment is leveraging technology to improve cost efficiencies and responsiveness, with contributions to earnings expected in 2026. The segment is positioned to accelerate revenue growth in an improving market.
Intermodal Segment: The Intermodal segment is focused on leveraging new rail partnerships and improving service, pricing, cost control, and equipment utilization in an improving market.
First Quarter 2026 Guidance: Adjusted EPS for Q1 2026 is projected to be in the range of $0.28 to $0.32, assuming stable current conditions, seasonal slowing in the truckload market, and seasonal recovery in the LTL market.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Why is the outlook for Q1 not more robust despite the tailwinds expected in 2026?
A:Adam Miller explained that Q4 had some strong projects materialize in October, but November volumes were disappointing, and the strength in December was not enough to offset the slower November. He noted that the first quarter might not fully reflect the benefits of bid season improvements, which are expected to materialize in the second quarter and beyond. He also mentioned constructive conversations with customers about securing lanes with positive rates and the impact of regulatory changes on capacity.
Q:How does management view margin progression from Q1, and what factors will drive it?
A:Adam Miller stated that margin improvement requires both cost reductions and revenue increases. While cost improvements have been the focus in recent years, they also aim to achieve rate increases to restore normalized margins. Andrew Hess added that margin repair involves capturing price, increasing volume, and reducing cost per mile, with cost improvements expected to contribute significantly in 2026.
Q:What is the current state of the LTL market, and how is the company addressing challenges?
A:Adam Miller noted that demand in the LTL market shifted downward in October and has not fully recovered. The company is leveraging its expanded network to bid on larger shippers and heavier loads, which could improve shipment volumes. Andrew Hess highlighted the move to a unified brand to enhance sales efforts and network design to address bottlenecks and improve efficiency.
Q:What is the strategy behind consolidating brands, and how does it impact operations?
A:Adam Miller explained that consolidating brands, such as rolling Abilene Motor Express into Swift Transportation, aims to create a unified network and improve efficiency. This approach helps reduce overhead, improve margins, and better serve customers. The decision was made after evaluating the challenges faced by smaller brands in achieving profitability.
Q:What are the early observations from the TL bid season, and how is capacity affecting the market?
A:Adam Miller mentioned constructive conversations with customers about positive rate adjustments and a shift from brokers to asset-based carriers. He highlighted regulatory changes reducing capacity, such as non-domicile CDL expirations and school closures, which could tighten the market further. Andrew Hess added that customers are looking to increase asset coverage in response to these changes.
Q:How is the company addressing cost reductions, and what progress has been made?
A:Andrew Hess detailed significant cost reductions in maintenance, fuel, and insurance, as well as fixed costs like real estate and overhead. These efforts have improved cost per mile and operating ratio. The company is deploying new technologies for routing, fuel optimization, and advanced auto planning to further reduce costs and improve efficiency.
Q:What is the outlook for driver wages and capacity in the current cycle?
A:Adam Miller stated that driver wages may not increase significantly unless there is strong momentum in rates. Improved utilization and higher miles per truck naturally raise driver pay. The company will dynamically adjust wages based on regional needs and market conditions to ensure sufficient capacity.
Q:What are the recent trends in truckload and LTL volumes, and what is driving them?
A:Adam Miller observed that truckload volumes in early January were more balanced than usual, likely due to capacity tightening rather than demand increases. LTL volumes are normalizing after a soft Q4, with opportunities to gain share through new customer bids.
Q:How does management view the relationship between price, utilization, and margins in the current cycle?
A:Adam Miller emphasized the goal of achieving both price increases and better utilization to improve margins. He noted that the current cycle may allow for better alignment of these factors compared to previous cycles. Andrew Hess added that new tools for matching demand across brands and optimizing networks will enhance utilization and efficiency.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance on EPS beyond Q1 and did not clearly address whether demand or capacity was the primary driver of recent trends in truckload volumes. Additionally, while they discussed regulatory impacts on capacity, they did not provide detailed data on how these changes would quantitatively affect the market.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI method
CDL school
CDLs CDL
Capacity reduction
DHE acquisition
DHE market
DOT CDLs
Developments precursor
FMCSA DOT
Fed
Truckload brand
Truckload segment
Xpress
advance
beginning
benefit
capacity way
confidence
demand environment
development
disruption
door count
enforcement
equipment market
gain
impairment
influx capacity
investment
level market
market demand
market trend
opportunity market
point tax
productivity
project activity
segment Slide
segment Truckload
segment demand
service market
spot rate
technology
truckload market
turn
way truckload
KNX Transcript
Knight-Swift Transportation Holdings Inc. (KNX) Q4 2025 Earnings Call Transcript
Unknown1-21
The earnings call reveals mixed signals: while there are positive developments such as improved revenue per load and cost reductions, there are also concerns like disappointing November volumes and unclear guidance. The Q&A highlights challenges in the LTL market and regulatory impacts, but also potential for margin improvement. The lack of robust Q1 outlook and management's evasiveness on specific guidance contribute to a neutral sentiment, indicating minimal stock movement.
Knight-Swift Transportation Holdings Inc. (KNX) Q3 2025 Earnings Call Transcript
Unknown10-22
The earnings call reveals mixed signals: strong financial performance in some segments and operational improvements, but concerns over Q4 margins, unclear management responses, and lower-than-expected EPS. The Q&A highlights uncertainties in capacity and seasonal demand. While optimistic guidance and cost-cutting initiatives are positives, the lack of immediate capacity tightness and unclear seasonal demand offset these. The neutral sentiment reflects these balanced positives and negatives.
Knight-Swift Transportation Holdings Inc. (KNX) Q2 2025 Earnings Call Transcript
Unknown7-23
The earnings call summary presents a mixed picture. While there are positive aspects such as growth in the LTL segment and cost-saving initiatives, the lack of specific guidance for the fourth quarter and challenges with acquisitions and market transparency create uncertainty. The Q&A section reveals management's cautious tone and vague responses, especially regarding future guidance and market conditions. These factors offset potential positives like technology-driven efficiency gains, leading to a neutral sentiment overall.
Earnings call transcript: Knight-Swift Q3 2024 beats EPS expectations
Unknown1-22
The earnings call presents a mixed picture: financial performance shows declines in revenue and operating income, and increased expenses, which are negative. However, LTL revenue growth and optimistic guidance about market conditions improving gradually are positives. The Q&A reveals management's confidence in cost synergies but also highlights challenges in integration and lack of clarity on some issues. Given these mixed signals, with no clear catalyst for a strong positive or negative reaction, the stock price is likely to remain neutral in the short term.
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