Fourth quarter earnings season is upon us, and the rest of the LTL carriers are coming forward.
Next out of the LTL gates is the fast-growing "new kid on the block” Knight-Swift, with their rapidly expanding network grown from the foundation of AAA Cooper and Midwest Motor Express.
A few times a year in our newsletter, we feature a Carrier Earnings series where we evaluate the financial performance of leading carriers in the logistics industry. We do this by analyzing the quarterly results they release after each quarter.
Like we did with our Q3 Earnings analyses in November, these articles focus on Q4 Earnings and examine the factors that contribute to success or challenges within each carrier's operations. We’ll provide you with comprehensive views of the broader supply chain landscape as it relates to each carrier’s earnings.
For more information about carrier performance reporting as it relates to your LTL, click here to connect with someone on our team today.
To catch up on KNX’s Earnings from Q3 in our most recent report about them, read our latest article on them here from our Q3 Earnings series by #LetsTalkLogistics!
For now, let's take a look at what’s happening at KNX within their LTL division:
Carrier 2: Knight-Swift
Management at KNX noted that LTL strength continues while the truckload sector remains relatively soft.
They’re obviously still very satisfied with the purchase of AACT and MME.
They reported an 85.5 adjusted OR (or an 87.8 OR when fuel is not backed out).
That latter figure is used to facilitate carrier comparisons…it’s really the only reason they make a point of using an adjusted OR that removes the fuel surcharge in the way they do.
Their OR changed only modestly, improving 0.6 points over last year and degrading -0.6 points from last quarter.
Doing a good job managing costs while growing significantly.
Shipment counts were up 11.9%, tonnage was up 9.7%, and revenue was up 9.5% on a year-over-year basis.
Sequentially, shipments were down -5.2%, tonnage was down -6.0%, and revenue was down -2.9%.
KNX's growth is being fueled more by its expanding network than by the business brought on by Yellow's collapse.
Revenue per cwt, excluding fuel, was up a whopping 9.5%. This metric did benefit from an 8.0% longer length of haul and a -1.9% reduction in weight per shipment.
Interestingly enough, KNX handled their 11.9% growth in shipments with virtually the same number of tractors (about 3,300) and trailers (about 8,600) as last year…a notable and effective use of equipment.
Network Expansion
At the end of 4Q23, KNX had 115 terminals and 4,551 doors.
KNX expects to close on 15 new terminals by the end of January and has 25 terminals in their possession that are "in development" - that’s 40 terminals slated to be opened in the future on top of the 14 they’ve added since purchasing AACT and MME.
Massive network expansion…and KNX is far from done.
Makes me think back to Q3 when we made this graphic about KNX…and how it’s still just as applicable and representative of their growth today.
(Access the rest of their Q3 Earnings analysis HERE for more information and more KNX memes!)
Creating a national network in the long term remains a key strategic priority for them while they continue filling out a super-regional network in the short term.
KNX actually is relying heavily on 3PLs and their transactional business to help support volumes at newly opened terminals.
Over time, they want to shift reliance away from the transactional business as they begin seeking longer-term local customer relationships.
New terminals are predicted to take 60-90 days to build up enough volume to break even on profits.
KNX is also still pursuing some of the Yellow Corp properties that haven’t been sold yet, so expect the 25 terminals in development to grow.
They expect to have a national network complete in the next 2 years (by the end of 2025).
Outlook into 2024, even 2025
Management expects yield improvement as new business following the Yellow Corp closure is repriced through bid activity.
KNX desires to grow shipments and tonnage but is more focused on profit growth.
2024 weather has been brutal so far and will definitely weigh on Q1 earnings.
KNX is strongly telegraphing that they will have a national network by the end of 2025.
With that confidence, they must have a strong bead on what it will take to fill in the large gaps in the Northeast and West.
Is it a build plan, opening new terminals to fill in these holes? Or is it a buy plan, buying a carrier operating in one or both of those holes?
California is a tough state to expand to, so expect KNX to make a purchase to fill in California at the least.
My gut (plus the location of the terminals in development) tells me that KNX intends to fill these two holes largely via carrier purchases.
Big kudos to them for successfully merging with AAA Cooper and Midwest Motor.
While they’ll be the first to tell you this merger was challenging and did not go perfectly…from the outside, they did a stellar job.
Merging two systems, two cultures, is NOT easy.
We all know what it could’ve looked like if this merger got messy. The LTL industry doesn’t have too great of a great track record here (cough FORWARD AIR cough)... but KNX has done well.
That alone can pave the way for confidently expecting the same as they grow to a national footprint, and we can't wait to see what that looks like for KNX over the next 2 years!
Looking to diversify your LTL carrier portfolio? Rising LTL carrier profits like we see here with FedEx mean it's time to test the field to ensure you're getting a fair rate. Click this link to connect with someone on our team today.
This article was collaboratively written by “LTL Observers” - a collective of industry veterans spanning the carrier, shipper, 3PL, and tech provider spaces who are willing to share their opinions.
Disagree with these opinions? We'd love to add you to the line-up to make sure we're including a diverse set of LTL observers. Contact us today.