The nation’s largest truck transporter, Knight-Swift Transport (NYSE: KNX), posted a better-than-expected first quarter on Wednesday. The Phoenix-based company reported adjusted earnings per share of 83 cents, 13 cents higher than consensus and 39 cents better than the quarter last year.

The quarter benefited from a reversal of nearly $ 23 million in other income from the prior year. “The year-over-year improvement was primarily due to recognized gains in our investment portfolio in the first quarter of 2021,” the press release said.

The result also benefited from a $ 7.5 million increase in gains on equipment sales and a lower tax rate (-130 basis points) compared to the first quarter of 2020.

Knight-Swift raised its forecast of adjusted EPS for the full year to a range of $ 3.45 to $ 3.60, about 7% higher than the original forecast in the middle of the range. The new guide is well ahead of current consensus expectations, which is $ 3.40, but reflects the outperformance of non-operating profit in the quarter.

The company’s forecast assumes a percentage increase in the mid-teens of road haulage contract rates, as “the demand for haulage trucks is at unprecedented levels and is expected to continue through 2022.”

Table: Key Performance Indicators of Knight-Swift – Consolidated

Knight-Swift’s trucking segment saw a 6% year-over-year increase in revenue, excluding fuel surcharges, to $ 873 million. Tractor-loaded miles were down 7% in part due to severe winter storms during the quarter, which was offset by a 16% increase in revenue per loaded mile (excluding fuel) to $ 2.62.

The division’s cost structure remained fairly stable over the period. Salaries, wages and benefits as a percentage of revenue declined 120 basis points year over year, which was more than offset by a 110 basis point increase in purchased transportation.

“Our trucking industry weathered adverse weather conditions and driver supply issues during the quarter and improved average revenue per tractor by 7.7%, resulting in an improvement in 470 basis points of the adjusted operating ratio to 81.8% in the first quarter of 2021, up from 86.5%. in the first quarter of 2020, ”the press release continued.

The Swift fleet was operating at an adjusted rate of return of 78.5%, with Knight operating at a 79% level.

Table: Knight-Swift Key Performance Indicators – TL

Brokerage revenue increased 51% year over year to $ 116 million, as revenue per load jumped 43% and expenses increased just north of 5%. The division’s gross margin fell 30 bps to 14.4%. The company’s power-only offering accounted for 25% of total brokerage volumes with its digital brokerage platform, Select, accounting for 20% of volumes.

Intermodal revenues increased 13% year over year, with revenues per load up 10% leading the bulk of the increase. The division returned to profit, posting an adjusted OR of 96.8%.

“Despite the weather and service disruptions in the first quarter of 2021, our intermodal segment has improved its operating results year over year, and we expect continued improvement over the next few quarters,” said the report.

Table: Knight-Swift Key Performance Indicators – Brokerage and Intermodal

The company reiterated net capital spending of $ 450 million to $ 500 million in 2021, 22% more than the 2020 mid-term investment. The bulk of the expenditure is for the replacement of tractors and trailers and for the improvement of its network of terminals. The average age of Knight-Swift tractors rose to 2.3 years in the quarter from 2 years a year ago.

Knight-Swift ended the quarter with $ 853 million in free cash and net debt of $ 632 million, down $ 126 million from the end of 2020. The company generated $ 306 million in cash operating, $ 262 million in free cash flow.

The company recently increased the dividend by 25% to 10 cents per share and repurchased $ 54 million of its shares during the quarter.

KNX shares are down more than 4% at the start of the trading day against the S&P 500, which is up 0.5%. The quality of the earnings beat and the increase in forecasts, in large part due to the increase in non-operating income, is likely the reason for the underperformance.

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