Knight-Swift Transportation Holdings limited its losses in Q1 after a Q4 hammering.
Following a net loss of $10.7 million to finish out 2023, the trucking giant posted a net loss of $2.6 million to start off 2024, according to an earnings presentation Wednesday.
Brad Stewart, treasurer and SVP of investor relations, said on an earnings call that TL conditions continue to be soft along with excess capacity among trucking firms, following significant weather complications in January.
Operating losses hit its intermodal and catchall segments but spared Knight-Swift’s TL, LTL and logistics segments. “Market conditions in the LTL business continue to be solid,” Stewart also said.
Ditching a third-party insurance business also helped reduce losses. Earlier this year, the carrier announced it would exit that business after the initiative posted a $71.7 million operating loss in Q4.
Knight-Swift’s Q1 loss from the insurance unit narrowed to $19.5 million, and the company ceased the operation at the end of the quarter, executives said on the call.
The troubling experience at least provided some wisdom. CEO Adam Miller noted that the carrier had better visibility on how smaller carriers were shrinking fleets to stay afloat. That might be more telling than federal data on revocations, which treat one-truck and 100-truck operations the same, he said.
“You probably have a lot more capacity exiting, not from DOTs failing, but from companies just shrinking their fleet,” he said. “We saw them shrinking dramatically, not going out of business completely, but just pulling down the truck count because of the inability to keep the trucks productive enough to support the payments.”
Miller said the market conditions are one of the deepest recessions the industry has ever seen — even though other parts of the economy are performing well.
He said cost inflation “continues to be a challenge, labor is staying tight and interest rates are up significantly,” creating pricing and cost pressures and “razor thin margins, and even losses for some of the best run companies in our industry.”
Operating income for Knight-Swift drastically receded by nearly 86% year over year to less than $20.6 million in Q1, the carrier reported Wednesday.
The environment follows a period of record highs tied to the COVID-19 pandemic for carriers, Miller noted.
Despite the losses, Knight-Swift feels it’s in a position to take advantage of any market inflection that occurs, as in previous cycles, he said.
“There’s not as much slack in the supply chain as there once was,” Miller said.
Spot rate uplift is not expected in Q2, CFO Andrew Hess said. From Q2 to Q3, cost improvements will be a bigger driver than market demand in improving margins, Miller added.
“The plan can’t be that the market is going to solve our problems,” Miller said. “Cost is going to be the biggest focus for us.”
