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DSV: STAR OF THE WEEKDSV: FLAWLESS EXECUTIONKNIN: ANOTHER LOWWTC: TAKING PROFITMAERSK: HAMMEREDZIM: PAINFUL END OF STRIKE STLA: PAYOUT RISKAMZN: GOING NOWHEREAMZN: SEASONAL PEAK PREPARATIONSJBHT: LVL PARTNERSHIPHD: MACRO READING AND DISCONNECTSTLA: 'FALLING LEAVES'STLA: THE STEEP DROP
DSV: STAR OF THE WEEKDSV: FLAWLESS EXECUTIONKNIN: ANOTHER LOWWTC: TAKING PROFITMAERSK: HAMMEREDZIM: PAINFUL END OF STRIKE STLA: PAYOUT RISKAMZN: GOING NOWHEREAMZN: SEASONAL PEAK PREPARATIONSJBHT: LVL PARTNERSHIPHD: MACRO READING AND DISCONNECTSTLA: 'FALLING LEAVES'STLA: THE STEEP DROP
The largest US truckload carrier by revenue is under new leadership: CEO and president David Jackson has left, to be replaced by CFO Adam Miller.
Neither Mr Jackson nor Knight-Swift’s board offered any explanation for the sudden departure after nearly 24 years, other than a remark by the outgoing CEO that it was “time for a change and for the next generation to take the baton”.
He has presided over a string of depressed quarterly results, the latest of which, Q4 23, producing a loss of $10.9m.
Poor results have been the hallmark of pretty much the entire truckload sector, but in Knight-Swift’s case they have been aggravated by losses in the company’s insurance business providing liability cover to smaller trucking firms. This segment produced a $71.1m operating loss in the last quarter, prompting management to initiate the company’s exit from this business, as was announced during the earnings call.
Satish Jindel, president of SJ Consulting, regards the insurance fiasco as a contributing factor to Mr Jackson’s departure, but he sees the slow progress of Knight-Swift’s foray into the LTL business as the major issue.
The company moved into the LTL arena in 2021 with the acquisitions of AAA Cooper Transportation and MME. Lately it has stepped up its advance there with the acquisition of 13 terminals of defunct Yellow, plus the leases on another 12 former Yellow facilities.
Management signalled at the Q4 earnings call that it wanted to complete the expansion into a nationwide LTL network by the end of next year, but it still has significant gaps to fill, notably in the north-east and mid-Atlantic regions and California.
Mr Jindel questioned why Knight-Swift did not adopt a more aggressive stance it its LTL expansion but spent money on the acquisition of truckload firm US Xpress instead. He pointed to the growth and the margins in the LTL sector compared to the truckload business, noting that the top 20 LTL carriers command about 85% of that market, in stark contrast with the highly fragmented truckload arena.
Carrier valuations are another powerful incentive to concentrate on the LTL business, added Mr Jindel. “Saia is trading at over five times its revenues, Old Dominion at more than eight times; Knight-Swift is at 1.3 times.”
Knight-Swift should have moved at a faster pace in the LTL market, he argued.
“Expanding organically while you still have large areas uncovered takes a long time,” he said. “Yes, they’ve now bought terminals, but they still need to get managers to run them.”
He expects the LTL expansion to pick up steam under Mr Miller, who has been with the company since 2002 in a variety of roles.
In Knight-Swift’s announcement of the change at the helm, Mr Miller said his management team would be “intently focused on expanding our LTL footprint, improving consolidated margins, and generating free cash flow and stockholder returns”.
One opportunity to ramp up for more LTL business will be the auctioning of Yellow’s equipment pool in the coming two months. Mr Jindel expects Knight-Swift to acquire some of this equipment. Yellow, which had focused at the low-price end of the LTL market, has some outdated equipment, but it did use a $700m government loan obtained under Washington’s Covid relief programmes to buy new tractors and trailers.
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