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Knight-Swift Transportation Holdings narrowed its losses in the first quarter after a hammering in the fourth quarter.
After a net loss of $10.7 million to end in 2023the trucking giant posted a net loss of $2.6 million to start 2024, according to earnings presentation Wednesday.
Brad Stewart, btreasurer and SVP of investor relationshe said to earnings call that TL conditions continue to be mild along with excess capacity among trucking companies, following significant weather complications in January.
Operating losses hit the intermodal and catchall divisions, but spared Knight-Swift’s TL, LTL and logistics divisions. “Market conditions in LTL Business continues to be solid,” Stewart also said.
Dropping a third-party insurance business also helped reduce losses. Earlier this year, the carrier announced that it would exit this business following the publication of the initiative a Operating loss of $71.7 million in Q4.
Knight-Swift’s first-quarter loss from the insurance unit narrowed to $19.5 million, and the company ceased operations at the end of the quarter, executives said on the call.
The disturbing experience provided at least some wisdom. CEO Adam Miller noted that the carrier had better visibility into how smaller carriers were shrinking their fleets to stay afloat. That may be more telling than federal recall data, which treats one-truck and 100-truck operations the same, he said.
“You probably have a lot more capacity coming out, not from the DOT failure, but from companies just shrinking their fleet,” he said. “We’ve seen them shrink dramatically, not go out completely, but just reduce the number of trucks because of the inability to keep the trucks productive enough to support the payments.”
Miller said market conditions are one of the deepest downturns the industry has ever seen – even though other parts of the economy are performing well.
He said cost inflation “continues to be a challenge, work remains tight and interest rates are rising significantly,” creating price and cost pressures and “low margins and even losses for some of the best companies in our industry.”
Operating income for Knight-Swift plunged nearly 86% year over year to less than $20.6 million in the first quarter. the carrier reported on Wednesday.
The environment follows a period of record highs associated with the COVID-19 pandemic for carriers, Miller noted.
Despite the losses, Knight-Swift believes it is in a position to benefit from any market tilt that occurs, as in previous cycles, he said.
“There’s not as much slack in the supply chain as there once was,” Miller said.
No rate hike is expected in the second quarter, CFO Andrew Hess said. From Q2 to Q3, cost improvements will be a bigger driver than market demand to improve margins, Miller added.
“The plan can’t be that the market is going to solve our problems,” Miller said. “Cost will be the biggest focus for us.”