Knight-Swift to Demand Double-Digit Rate Hikes as Truckload Margins Turn

Knight-Swift (NYSE: KNX) will open next month's bid season asking contract customers for at least double-digit rate increases, CEO Adam Miller said Wednesday evening, after the carrier posted a third-quarter adjusted operating ratio in truckload that improved 700 basis points year over year.

"I think we'll start the bid season with the idea of probably low-to-mid double digits and see how it develops from there," Miller told analysts on the company's call, held after markets closed alongside its better-than-expected Q3 report.

The nation's largest asset-based truckload carrier earned adjusted earnings of 83 cents per share in the quarter, 51 cents above the year-ago result and 7 cents ahead of Wall Street expectations. Management had guided to 71 to 77 cents. Revenue of $2.2 billion rose 14% year over year, or 8% excluding fuel surcharges, edging past the $2.17 billion consensus.

Why can Knight-Swift push for big increases?

The carrier says its high exposure to one-way truckload — the segment gaining most from the regulatory-fueled capacity shakeout — gives it leverage. Its spot pricing trended above public indicators in the quarter, and its tender rejection rates run two to three times broader market measures.

"Our spot pricing trended better than public indicators in the quarter, staying well above contractual rates that continued to accelerate throughout the period," Miller said in the news release.

Pricing is now outrunning cost inflation decisively. In Q1, revenue per total mile (ex-fuel) lagged cost per mile by 90 bps. The spread flipped to positive 390 bps in Q2 and hit 840 bps in Q3. The company forecasts another 650 to 750 bps of year-over-year TL margin improvement in Q4, implying an 85.9% adjusted OR, with ex-fuel revenue up a low-double-digit percentage.

What did the truckload unit deliver?

TL revenue (ex-fuel) rose 6.5% year over year, on an 11% increase in revenue per tractor despite a 4% smaller fleet. Key operational metrics:

• Loaded miles per tractor up 1% — an eighth straight annual improvement
• Deadhead down 170 bps to 12.1%
• Revenue per loaded mile (ex-fuel) up 10%, mid-teens in over-the-road
• Adjusted OR of 89.2%, at the midpoint of guidance

U.S. Xpress, acquired in 2023, ran at a low-90s adjusted OR; legacy Knight-Swift brands hit 88%. One-way margins exceeded dedicated margins for the period — notable given roughly 29% of the TL fleet runs under dedicated contracts. Management said it will grow the fleet selectively but flagged that "sourcing quality drivers is as challenging as it has been in years."

What's happening with LTL?

The less-than-truckload unit, built through acquisitions of AAA Cooper and Midwest Motor Express in 2021 and Dependable Highway Express in 2024, plus more than 50 organic terminal openings over five years, still lacks a Northeast footprint. The company said it has chosen locations in the region and will add terminals at a "very deliberate" pace, hinting the national map may be completed organically rather than by acquisition.

LTL revenue rose less than 1% ex-fuel, as tonnage gained 3% while revenue per hundredweight fell 1%. Revenue per shipment climbed 4%, with contract renewals up mid-single digits. The unit's 91.4% adjusted OR was 80 bps worse year over year, dragged by a $4.6 million decline in gains on sale — a 130 bp headwind. Q4 guidance calls for high-single to low-double-digit revenue growth with 100 to 200 bps of margin improvement, implying a 93.6% OR.

Other segment results

Logistics improved 120 bps to a 93.1% adjusted OR, with brokerage gross margin up 110 bps to 18.9% — 350 bps better sequentially — on what management called a disciplined approach to profitability and carrier selection. Intermodal posted a second consecutive operating profit at a 97.8% adjusted OR, with loads up 13% to a five-year high and revenue per load 15% higher.

Fourth-quarter adjusted EPS guidance of 78 to 84 cents bracketed the 82-cent consensus. Q3's bottom line also benefited from a $22 million drop in net interest expense (10 cents), a lower tax rate (5 cents) and slightly higher equipment-sale gains (1 cent), offset partly by a $3.5 million decline in other income.

As the industry bellwether, Knight-Swift's quarter signals the truckload market has moved from cyclical downturn to structural recovery — and shippers heading into bid season should expect the largest asset-based carrier to price accordingly.