Knight-Swift Transportation Q1 Earnings Call Highlights

Key Points

• Management said regulatory enforcement and winter storms are driving tightening capacity, allowing Knight‑Swift to push pricing higher and lift bid targets to a range of high-single- to low-double-digit percentage increases.
• Q1 was hit by unusual items — notably an $18M LTL claim, $4M VAT tax expense, warehousing deferrals and an estimated $12–14M weather/fuel impact — producing a GAAP loss of $0.01 per diluted share and adjusted EPS of $0.09 (down from $0.28), while the consolidated adjusted operating ratio rose to 97%.
• Knight‑Swift expects a “larger than normal” sequential rebound with Q2 adjusted EPS $0.45–$0.49, and says reaching normalized mid‑80s truckload operating ratios depends on capturing higher rates, better equipment utilization and increasing seated trucks amid tighter third‑party carrier sourcing (management has cut carrier partners ~30%).

Knight-Swift Transportation NYSE: KNX executives struck an optimistic tone on the company’s fiscal first-quarter 2026 earnings call, pointing to what CEO Adam Miller described as the strongest reasons for optimism in the truckload industry “in over four years,” driven largely by tightening capacity and an active bid environment. However, the quarter’s reported results were weighed down by unusual items and weather-related disruptions, according to CFO Andrew Hess.

Management sees tightening capacity and a more active pricing backdrop

Miller said the company’s heavy exposure to one-way, over-the-road freight—about 70% of its fleet—has been a headwind over the past several years but is now becoming a strategic advantage as lower-priced capacity exits the market. He pointed to enforcement actions from the Federal Motor Carrier Safety Administration (FMCSA) and the Department of Transportation aimed at “prevent and revoke invalidly issued CDLs,” shut down non-compliant CDL schools, and address service abuses.

“This cleanup effort should, in our view, have an outsized impact on not just the one-way truckload market, but on the lowest priced capacity in this market,” Miller said.

Miller also said winter storms in January created rapid tightness and elevated spot prices “almost overnight,” allowing the company to leverage scale across its brands to support customers. After the storm, he said tightening continued “largely due to declining capacity,” with “some indications of improving demand” beginning to emerge.

Late in the first quarter, Miller said early bid outcomes showed volumes generally holding steady or growing with “mid-single-digit percentage rate increases.” He added that Knight-Swift has since raised bid targets to “a range of high single- to low double-digit percentage increases” compared with “low- to mid-single-digit” targets a quarter earlier.

Q1 results impacted by claims, tax item, and weather

Hess said consolidated revenue excluding truckload and LTL fuel surcharge was “essentially flat” year over year, while operating income declined by $38 million. He attributed the decline primarily to several items discussed on the call, including:

• $18 million of expense for claim development in the LTL segment tied mainly to an adverse arbitration ruling on a 2022 claim
• $4 million of expense in the truckload segment for an adverse decision on VAT reimbursement in Mexico for prior tax years
• Warehousing project business deferred to future quarters
• An estimated $12 million to $14 million net negative impact from winter weather-related volume and cost headwinds, along with “sharply rising fuel prices”

GAAP earnings per diluted share were a loss of $0.01, compared with $0.19 in the prior-year quarter. Adjusted EPS was $0.09, down from $0.28 a year earlier. Hess said the consolidated adjusted operating ratio was 97%, up 230 basis points year over year.

Segment performance: Truckload steadier, LTL mix shifts, Logistics pressured by carrier sourcing

Truckload: Hess said most operational metrics improved through the quarter despite weather and fuel challenges. Revenue per loaded mile excluding fuel surcharge and inter-segment transactions improved 1.4% year over year, while loaded miles declined 1.8%, resulting in revenue excluding fuel surcharge that was “essentially flat.” He said the segment’s adjusted operating ratio was 96.3%, a 70 basis-point deterioration year over year, as reduced empty miles and a strengthening rate environment largely offset headwinds.

Hess said the first quarter marked the “seventh consecutive quarter of year-over-year improvement in miles per tractor.” He also noted that U.S. Xpress continued improving operating efficiency, but trailed legacy brands by about 300 basis points in adjusted operating ratio. Miller later said rate repair remains a key opportunity at U.S. Xpress and that the company is getting “good feedback in the early parts of the bid.”

LTL: Hess said LTL revenue excluding fuel surcharge rose 2.6% year over year, driven by a 5.2% increase in weight per shipment and an 8.5% increase in length of haul. March average daily tonnage was up 7% year over year, and Hess characterized tonnage momentum as improving as the quarter progressed. Shipments per day fell 1% year over year due to January weather disruption and the shift to heavier shipments.

Revenue per hundredweight excluding fuel surcharge declined 70 basis points year over year, which Hess attributed to the heavier shipment mix, while renewal rates continued at “mid-single-digit increases.” Miller emphasized the company is seeing a freight mix improvement toward more industrial customers and longer length-of-haul freight as it transitions from a regional to national network.

Logistics: Brad Stewart, treasurer and senior vice president of investor relations, said Logistics revenue fell 9.9% year over year as volumes declined 18.9%, partially offset by a 10.4% increase in revenue per load. Gross margin was 16.6%, down 150 basis points year over year but up 110 basis points sequentially from the fourth quarter, as spot opportunities helped offset pressure in contract-priced business.

Stewart said third-party carrier capacity has been harder to source and that the company tightened carrier qualification standards in response to rising cargo theft and “troubling carrier practices” highlighted by regulatory efforts. Miller said the company has “cut down the number of carriers that we work with dramatically,” adding that “since the beginning of this year, we’re down 30%.” Management said those actions have pressured capacity costs and led the business to reject more loads as unprofitable, but expects improvement as contractual pricing resets through bid season.

Intermodal and “all other”: Stewart said intermodal revenue grew 2.7% and operating ratio improved 50 basis points year over year, with March load count up 8.4%. “All other” segment revenue rose 13.5%, but operating results moved to a loss partly due to $5 million of accounts receivable securitization costs (now included in the segment beginning Jan. 1, 2026) and warehousing startup costs tied to new contract awards that are expected to ramp in coming months.

Regulatory themes: enforcement, safety, and drug testing

In the Q&A, Miller said multiple regulatory and enforcement efforts could deter “bad actors” and further reduce capacity, citing actions tied to non-domiciled CDLs, English language proficiency, potential minimum insurance changes, and increased oversight of training and logs. “When you aggregate them, I think we’re already starting to see that influence the market,” Miller said, adding that the rate improvement the company is seeing is “driven largely by capacity reduction versus demand.”

Hess said discussions suggest the administration is “committed to the cleanup that needs to happen in our industry,” and that enforcement effectiveness is not dependent on legislation, though legislative support could make changes more durable.

Stewart also addressed hair follicle drug testing, saying Knight-Swift conducts both urinalysis tests recognized by federal rules and hair testing, which he said identifies “roughly 14 times the drug users” compared with urinalysis. He said the company would like to be able to report those results to the registry to improve safety.

Guidance: Q2 adjusted EPS projected at $0.45 to $0.49

Stewart said Knight-Swift expects adjusted EPS of $0.45 to $0.49 for the second quarter of 2026, which would represent a “larger than normal sequential increase,” reflecting first-quarter impacts that are not expected to recur and improving freight market fundamentals exiting the quarter. He added that contractual truckload pricing improvements typically begin to impact results “beginning late in the Q2 and into the third.”

In response to questions about longer-term profitability, Miller described normalized truckload performance as “mid-80s” operating ratio in a normalized market, with “sub-80s” in strong markets and “upper 80s” in difficult markets. He said the company sees a setup in the current bid season and into next year to move back toward that mid-80s profile, contingent on capturing higher rates, improving equipment utilization, and increasing seated trucks without necessarily adding equipment.

About Knight-Swift Transportation NYSE: KNX

Knight-Swift Transportation Holdings Inc NYSE: KNX is one of North America's largest asset-based truckload carriers, offering a wide range of transportation and logistics services. The company was formed in 2017 through the merger of Knight Transportation and Swift Transportation, each with decades of experience in long-haul dry van and refrigerated freight. Since the merger, Knight-Swift has pursued a growth strategy that includes fleet expansions, targeted acquisitions, and investments in technology to enhance service reliability and network efficiency.

The company's core business activities include full truckload operations for dry van, temperature-controlled and flatbed shipments.

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