Shares of Knight-Swift Transportation (KNX -3.11%) were moving higher today after the diversified transportation company topped analyst estimates in its third-quarter earnings report.

As of 11:27 a.m. ET, the stock was up 9.4% on the news.

A truck at a loading dock

Image source: Getty Images.

The competitive landscape is improving for Knight-Swift

Knight-Swift, which offers full-truckload, less-than-truckload (LTL), logistics, and intermodal services, posted solid revenue growth in its third quarter with the top line up 6.5% to $2.02 billion, ahead of estimates at $1.89 billion, helped in part by its acquisition of U.S. Xpress.

That growth was driven by its full truckload business, which saw revenue jump 22% to $1.17 billion, excluding its fuel surcharge.

However, profitability in that key segment fell due to an "extremely difficult environment," including ongoing soft demand, and an increase in fuel prices. Adjusted operating ratio, which is the inverse of operating margin and excludes the U.S. Xpress acquisition, jumped from 81.8% a year ago to 94.9% but improved slightly from the second quarter.    

Profit margins also shrank in the logistics and intermodal segments, and overall adjusted earnings per share (EPS) fell from $1.27 to $0.41, ahead of the consensus at $0.36.

Comments on the earnings call seemed to give the stock a boost. As CEO Dave Jackson said, "It feels like the extreme aggressiveness that we have seen out of non-asset-based players has reached a level to where it's not only unsustainable but when you add how expensive financing is ... it blows up." Those remarks seemed to refer in part to the closure this week of digital freight broker Convoy.

Can Knight-Swift stock move higher?

Knight-Swift revised its full-year adjusted EPS guidance from $2.10-$2.30 to $2.10-$2.20, and management forecast that truckload rates would stabilize at current levels and says it expects solid growth in LTL revenue and shipments. 

It also sees the bottom-line impact from the U.S. Xpress acquisition improving, a sign that the company will return to profit growth in 2024.

With interest rates still moving higher, it will take some time for the volatility in the industry to play out, but the worst of the U.S. Xpress integration seems to be behind the transportation stock.