Knight-Swift Transportation (KNX)

Freight delivery company Knight-Swift Transportation (NYSE:KNX) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 2.7% year on year to $1.93 billion. Its non-GAAP profit of $0.32 per share was 13.2% below analysts’ consensus estimates.

Company Overview

Covering 1.6 billion loaded miles in 2023 alone, Knight-Swift Transportation (NYSE:KNX) offers less-than-truckload and full truckload delivery services.

The growth of e-commerce and global trade continues to drive demand for shipping services, especially last-mile delivery, presenting opportunities for ground transportation companies. The industry continues to invest in data, analytics, and autonomous fleets to optimize efficiency and find the most cost-effective routes. Despite the essential services this industry provides, ground transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.

Competitors offering similar products include C.H. Robinson (NASDAQ:CHRW), Expeditors (NYSE:EXPD), and FedEx (NYSE:FDX).

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Knight-Swift Transportation grew its sales at a solid 10.2% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Knight-Swift Transportation’s recent performance shows its demand has slowed as its annualized revenue growth of 3.7% over the last two years was below its five-year trend. We also note many other Ground Transportation businesses have faced declining sales because of cyclical headwinds. While Knight-Swift Transportation grew slower than we’d like, it did do better than its peers.

This quarter, Knight-Swift Transportation reported modest year-on-year revenue growth of 2.7% but beat Wall Street’s estimates by 1.7%.

Looking ahead, sell-side analysts expect revenue to grow 3.4% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and suggests its newer products and services will not lead to better top-line performance yet.

At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.

Knight-Swift Transportation’s gross margin is slightly below the average industrials company, giving it less room to invest in areas such as research and development. As you can see below, it averaged a 29.4% gross margin over the last five years. That means Knight-Swift Transportation paid its suppliers a lot of money ($70.56 for every $100 in revenue) to run its business.

Knight-Swift Transportation produced a 41.9% gross profit margin in Q3, marking a 18 percentage point increase from 23.9% in the same quarter last year. Knight-Swift Transportation’s full-year margin has also been trending up over the past 12 months, increasing by 4.6 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Knight-Swift Transportation has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 8.7%, higher than the broader industrials sector.

Looking at the trend in its profitability, Knight-Swift Transportation’s operating margin decreased by 11.4 percentage points over the last five years. Many Ground Transportation companies also saw their margins fall (along with revenue, as mentioned above) because the cycle turned in the wrong direction. We hope Knight-Swift Transportation can emerge from this a stronger company, as the silver lining of a downturn is that market share can be won and efficiencies found.

This quarter, Knight-Swift Transportation generated an operating margin profit margin of 2.6%, down 1.7 percentage points year on year. Conversely, its revenue and gross margin actually rose, so we can assume it was less efficient because its operating expenses like marketing, R&D, and administrative overhead grew faster than its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Knight-Swift Transportation, its EPS declined by 11% annually over the last five years while its revenue grew by 10.2%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

Diving into the nuances of Knight-Swift Transportation’s earnings can give us a better understanding of its performance. As we mentioned earlier, Knight-Swift Transportation’s operating margin declined by 11.4 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Knight-Swift Transportation, its two-year annual EPS declines of 29.4% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q3, Knight-Swift Transportation reported adjusted EPS of $0.32, down from $0.34 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Knight-Swift Transportation’s full-year EPS of $1.31 to grow 45.1%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Knight-Swift Transportation has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.5% over the last five years, slightly better than the broader industrials sector.

Taking a step back, we can see that Knight-Swift Transportation’s margin dropped by 10.8 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

Knight-Swift Transportation broke even from a free cash flow perspective in Q3. The company’s cash profitability regressed as it was 4.3 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Knight-Swift Transportation historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.9%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Knight-Swift Transportation’s ROIC has decreased over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Knight-Swift Transportation reported $294.4 million of cash and $2.76 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.06 billion of EBITDA over the last 12 months, we view Knight-Swift Transportation’s 2.3× net-debt-to-EBITDA ratio as safe. We also see its $78.1 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Knight-Swift Transportation beat analysts’ revenue expectations this quarter. On the other hand, its EBITDA missed and its EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 2.9% to $45.99 immediately following the results.

Updated: December 4, 2025 at 10:32 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Knight-Swift Transportation falls short of our quality standards. Although its revenue growth was solid over the last five years, it’s expected to deteriorate over the next 12 months and its diminishing returns show management's prior bets haven't worked out. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets.

Knight-Swift Transportation’s P/E ratio based on the next 12 months is 28.4x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $53.58 on the company (compared to the current share price of $51.34).