Riding the Knight Bus

Here's a knight that definitely does not say "Ni!" While Knight Transportation (NYSE: KNX  ) is already one of the largest publicly traded truckers in terms of market capitalization, its profitable growth story doesn't seem to be over just yet.

Revenue in the fourth quarter climbed almost 30% for this truckload hauler of dry and refrigerated goods. Impressively, revenue was up 22% without the benefit of fuel surcharges, though results do include more than a 15% hike in the average number of tractors operating. All said and done, though, average revenue per loaded mile rose almost 6%.

The company not only hauled more stuff, but hauled it more profitably. The operating ratio improved slightly on a year-to-year basis, and the company saw net income jump more than 27%. Like Heartland Express (Nasdaq: HTLD  ) , Knight had some gains from asset sales in the quarter, but the overall impact was on the order of half a cent of earnings.

Despite the high fuel prices and the rising driver costs, Knight's management continues to seem optimistic about the company's growth prospects. Not only is the company seeing firmness in shipping rates (mid-to-high single-digit increases) and solid driver retention, but it would appear that increases in costs like fuel and insurance are hurting the smaller carriers even more than the larger ones -- giving companies like Knight more room and opportunity to expand.

And expansion is a big part of the story here. Not only is the company adding new tractors, but it's looking to grow by adding new service centers, as well. Still, even with a nearly two-thirds increase in capital spending for the year, the company managed to produce positive free cash flow -- something that not all truckers are achieving these days.

All in all, I like where Knight sits -- particularly with a diversified customer base that gets about one-third of its revenue from grocery stores and their suppliers. Sure, there are competitors like Frozen Food Express (Nasdaq: FFEX  ) and Marten (Nasdaq: MRTN  ) in the refrigerated business, as well as other truckload and less-than-truckload carriers like Swift (Nasdaq: SWFT  ) and Old Dominion (Nasdaq: ODFL  ) . But that hasn't stopped Knight from establishing one of the highest returns on invested capital in the industry, and it looks like the business is still barreling down the highway.

For more high-octane Foolishness, fuel up here:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 510575, ~/Articles/ArticleHandler.aspx, 8/31/2014 12:32:07 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement