Dive Brief:
- Knight-Swift Transportation Holdings’ Q4 TL segment operating income nosedived 72% year over year to $21 million, driven by impairment charges associated with rebranding its Abilene Motor Express subsidiary.
- Amid accounting for $52.9 million in impairment charges primarily connected with the Abilene transition, adjusted income for the segment dropped 10.7% to nearly $77 million, according to an earnings release. The decline was largely due to a decrease in loaded miles, the company said.
- “The lack of the typical broad-based seasonal lift in demand until late in the quarter led to lower truckload volumes than expected,” CEO Adam Miller further said in a statement. “While the spot market tightened in December, pressuring gross margins in the logistics space, it was a reduction in available capacity that seemed to be the primary driver of the tightening market.”
Dive Insight:
Addressing overlap with Swift Transportation and Abilene customers is helping realize efficiencies, and there’s no other remaining brand within Knight-Swift that would trigger a similar move, Miller told investors on an earnings call Wednesday.
He noted margins were degrading and the business felt that the move was the fastest way to improve its structure, reduce some overhead and put drivers into a better environment to succeed.
But executives suggested favorable conditions for the industry with carrier supply tightening, tender rejection rates holding this month and better network balance continuing into early January. Some analysts like American Trucking Associations Chief Economist Bob Costello have suggested that supply, rather than demand, may move the next cycle.
In particular, carriers are facing pressure from federal policies and liquidity issues. “With the ongoing efforts of the FMCSA and DOT to prevent and revoke invalidly issued CDLs, shut down non-compliant CDL schools, and address hours-of-service abuses, we believe capacity will continue to recede, leading to a healthier market where carriers can recover cost inflation and restore margins,” Miller said in a statement.
Among the changing market dynamics, spot rates and the spot-versus-contract spread improved to the best level seen since early 2022, Miller said. And the market is tightening primarily due to stress on capacity, he added.
“From an industry perspective, I think it's more driven by capacity tightness versus demand, which I think is encouraging because that tells me any uplift in demand is just going to be that much stronger for the market,” Miller said. “It will be that much more disruptive potentially.”
