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Here's Why Knight-Swift Should Book a Berth in Your Portfolio

Zacks Equity Research
·4-min read

Knight-Swift Transportation Holdings KNX stock is clearly on a tear, having gained 50.7% in the past six months compared with the 65% appreciation of its industry.

Let’s look into the factors that are working in favor of the stock.

Northward Earnings Estimates: The Zacks Consensus Estimate for current-quarter earnings has been revised 25% upward over the past 60 days. For 2020, the consensus mark for earnings has moved 30.2% north in the same time frame. The favorable estimate revisions are indicative of the brokers’ confidence in the stock.

Given the wealth of information at the brokers’ disposal, it is in the best interest of investors to be guided by their advice and the direction of their estimate revisions. This is because the latter parameter serves as a key determinant to ascertain the stock price.

Impressive Earnings Growth Amid Pandemic: The Zacks Consensus Estimate for current-quarter earnings per share is pegged at 55 cents, indicating a 14.6% rise from the year-ago quarter’s reported figure. Similarly, the consensus mark for current-year earnings per share stands at $2.20, implying a 1.4% increase from the prior-year reported figure.

Top Zacks Rank & Attractive Momentum Score: The stock has a Zacks Rank #1 (Strong Buy), currently, and a Momentum Score of A, which further highlights its short-term attractiveness. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Tailwinds: Knight-Swiftis being aided by efficient cost-control measures and enhanced safety procedures. Evidently, total operating expenses declined 10.8% year over year in first-half 2020. We are also impressed by the company’s efforts to add shareholder value via dividends and buybacks. In February, the company’s board approved a 33.3% hike in its quarterly cash dividend to 8 cents per share (annually 32 cents). During the first half of 2020, it returned $27.7 million to its shareholders in the form of dividends and $34.6 million through share buybacks. Its free cash flow generation supports its shareholder-friendly activities too. The company generated free cash flow of $188.2 million in first-half 2020. Its commentary that freight demand "gradually strengthened" throughout the June quarter is also encouraging.

Solid Industry Rank: The industry, to which Knight-Swift belongs, currently has a Zacks Industry Rank of 27 (of 250 plus groups). Such a solid rank places the company in the top 11% of the Zacks industries. Studies show that 50% of a stock price movement is directly tied to the performance of the industry group it hails from.

In fact, an ordinary stock within a strong group is likely to outperform a robust stock in a weak industry. Therefore, taking the industry’s performance into consideration becomes imperative.

Other Stocks to Consider

Investors interested in the Zacks Transportation sector may also consider some other top-ranked stocks like Landstar System LSTR, ArcBest Corporation ARCB and Atlas Air Worldwide Holdings AAWW, all flaunting the same Zacks Rank as Knight-Swift at present.Shares of Landstar, ArcBest and Atlas Air Worldwide have rallied more than 15%, 32% and 40% in the past three months, respectively.

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KnightSwift Transportation Holdings Inc. (KNX) : Free Stock Analysis Report
ArcBest Corporation (ARCB) : Free Stock Analysis Report
Landstar System, Inc. (LSTR) : Free Stock Analysis Report
Atlas Air Worldwide Holdings (AAWW) : Free Stock Analysis Report
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Zacks Investment Research