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July 26, 2018 2:30 PM, EDT
Knight-Swift Shares Tumble Most in Four Years Amid Driver Shortage
John Sommers II for Transport Topics

Knight-Swift Transportation Holdings Inc. lost almost a fifth of its market value July 26, marking the biggest drop in four years, after sales fell because of a lack of drivers.

The company, formed in a 2017 merger, said second-quarter revenue plummeted 17% at its Swift long-haul business while profit margins shrank at the refrigerated business. The company’s overall earnings missed analysts’ estimates by a penny, and its forecast for fourth-quarter profit was below estimates.

Knight-Swift Transportation Holdings ranks No. 5 on the Transport Topics Top 100 list of the largest North American for-hire carriers. It reported 18,381 company owned tractors and 4,688 owner operator tractors.

“The shortfall versus expectations appeared to be a function of fleet attrition, given driver recruiting challenges, as opposed to yield or margin performance,” Robert W. Baird analyst Ben Hartford said in a note to investors July 26. “While management does not believe anything is going wrong at Swift with regard to the integration, we expect investor confidence to be diminished.”

Knight-Swift’s troubles contrast with a benign outlook for the transportation industry, which has benefited as a strong U.S. economy has boosted freight demand. Meanwhile, difficulties finding truck drivers and tighter restrictions on driver hours, has raised freight rates.

The shares fell 18% on July 26 to $29.50 at 11:16 a.m. in New York after tumbling 19%, the most intraday since July 2014. Knight-Swift had declined 18% this year through July 25, while a Standard & Poor’s index of 11 trucking companies dropped less than 1%.

The Swift operation’s decline contrasted with the company’s Knight unit, where second-quarter sales increased 34% and operating profit margin rose by more than 5 percentage points to 18.4%.