Knight Transportations’ (KNX, Financial) stock has gained over 30% in the last year as compared to S&P 500’s 13% gains. Knight has delivered consistent growth over the past several quarters and the last quarter marked its 22nd consecutive quarter with year-over-year revenue growth excluding fuel surcharge. For the first quarter of 2015, the company earned $0.36 per diluted share versus $0.23 from the previous year. This was better than consensus estimates by five cents. Net income increased 55.1% year-over-year to $29.6 million while operating income increased 48.2% year-over-year to $46.3 million. Revenue, excluding trucking fuel surcharge, increased 25.1% year-over-year to $257.2 million, and the company’s total revenue increased 16.5% year-over-year to $290.3 million.
Knight Transportation is a provider of multiple full truckload transportation and logistics services, which generally involve the movement of full trailer or container loads of freight from origin to destination for a single customer. The company is one of North America's largest truckload transportation providers. The company has two reportable segments, Trucking and Logistics.
The following table shows revenue, EPS and other key metrics of the company over the last couple of years.
Over the last three years, the company’s EPS has increase from $0.80 to $1.25. Its revenue per share has increased from $11.70 to $13.43. According to analyst estimates, the company’s EPS is expected to further increase to $1.50 in FY2015 and $1.71 in FY2016. It top line is expected to grow 15.30% in the current year and 11.60% next year.
Over the past year, the company has seen improvements in the general economic environment. Increased demand for trucking services and a tightening of capacity has led to an improved trucking environment as well. Management expects strong demand for the company’s services to continue in 2015. The company seems to be well positioned in this market due to its internal initiatives to improve yield, increase productivity, and manage cost per mile.
Last month, analysts at Stifel upgraded the company from Hold to Buy with a price target of $35. Analysts cited the company’s growth prospects, healthy balance sheet, high ROIC, and relative undervaluation as their reason for upgrade. Knight’s earnings have grown at a CAGR of 16% since 2009, the company has a low net debt/EBITDAR ratio of 0.5 and a high ROIC of 14.6%.
The company’s is trading at a forward PE of 17.35 and has a dividend yield of 0.80%. Out of 21 analysts covering the company 11 have buy or strong buy ratings, nine have hold ratings and one has a sell rating. I believe the company is a good buy at current levels given its strong growth rate and reasonable valuations.
