Knight Transportation Earnings Preview

Investors are bracing for the worst and waiting to see whether Knight Transportation (NYSE: KNX  ) will fall short of Wall Street forecasts for the third consecutive quarter. The company will unveil its latest earnings on Wednesday. Knight Transportation and its subsidiaries is a short- to medium-haul truckload carrier of general commodities.

What analysts say

• Buy, sell, or hold?: Analysts think investors should stand pat on Knight Transportation with 16 of 24 analysts rating it hold. Analysts like Knight Transportation better than competitor Heartland Express overall. Five out of 18 analysts rate Heartland Express a buy compared to seven of 24 for Knight Transportation. While analysts still rate the stock a hold, they are a little more optimistic about it compared to three months ago.
• Revenue forecasts: On average, analysts predict $213.8 million in revenue this quarter. That would represent a rise of 15.3% from the year-ago quarter.
• Wall Street earnings expectations: The average analyst estimate is earnings of $0.19 per share. Estimates range from $0.11 to $0.24.

What our community says
CAPS All-Stars are solidly behind the stock with 85.7% granting it an outperform rating. The community at large backs the All-Stars with 83.2% assigning it a rating of outperform. Fools are bullish on Knight Transportation, though the message boards have been quiet lately with only 57 posts in the past 30 days. Knight Transportation has a bullish CAPS rating of four out of five stars that is about on par with the Fool community assessment.

Management
Knight Transportation's profit has risen year over year by an average of 10.3%. The company's gross margin shrank by 5.5 percentage points in the last quarter. Revenue rose 12.5% while cost of sales rose 27.6% to $86.9 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter	Q1	Q4	Q3	Q2
Gross Margin	53.4%	57.2%	58.3%	59.8%
Operating Margin	10.2%	18.0%	14.2%	14.0%
Net Margin	5.3%	7.6%	8.7%	8.5%

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