KNX stock rose 4% in morning trade on December 6, 2021, after the company acquired MME.
Knight-Swift Expands Its Less-Than-Truckload Footprint in 15 States Through the Acquisition of Midwest Motor Express
On Monday, December 6, 2021, Knight-Swift Transportation Holdings Inc. (NYSE: KNX), through one of its wholly owned subsidiaries, acquired 100% of RAC MME Holdings, LLC, and its subsidiaries, which operate under the brand names of Midwest Motor Express, Inc. and Midnite Express Inc. (together, “MME”). Prior to the acquisition, MME’s equity interests were held by an ownership group, including Red Arts Capital, Prudential Capital Partners, and Brightwood Capital Advisors.
Founded over 100 years ago, MME provides less-than-truckload (“LTL”), full truckload, and specialized and international logistics transportation services to a diverse customer base in its service territory in the upper midwestern and great northwestern regions of the United States. The MME regional footprint complements our current southeastern and midwestern LTL presence alongside our AAA Cooper Transportation (“ACT”) brand, which together cover over half of the United States. The MME acquisition reflects progress on our ongoing commitment to building a nationwide LTL footprint, leading to the further diversification of our revenue streams.
The transaction is expected to be $0.06 accretive to our Adjusted EPS1 in 2022. On a longer-term basis, we have identified potential areas of revenue and cost synergies that are expected to lead to growth and margin expansion consistent with our return-on-investment targets while preserving MME’s brand, locations, people, and culture.
Knight-Swift CEO, Dave Jackson, expressed the following, “We are excited to welcome MME to the Knight-Swift organization. MME is our next step toward a nationwide LTL network. While preserving and supporting MME’s identity and culture, we expect to bring many synergies from Knight-Swift. MME and ACT have minimal regional overlap, and we expect they will be a benefit to one another.”
Marlin Kling, President and CEO of MME, noted, “We believe that combining our company with North America’s truckload industry leader, Knight-Swift, and being part of building the next nationwide LTL network is an exciting development for MME and its employees. We look forward to achieving synergies, sharing best practices, and creating value for all Knight-Swift stakeholders.”
MME is expected to generate approximately $137 million in revenue, $27 million in Adjusted EBITDA1, and $16 million in operating income for full-year 2021. MME serves its blue-chip customer list through a network of over 30 service centers with a door count of approximately 800, strategically located across the upper midwestern and great northwestern United States. Service is provided to customers in the United States, Puerto Rico, and Canada through affiliations with leading regional and national LTL companies. The MME fleet includes approximately 460 tractors and 930 trailers. MME has approximately 800 highly skilled and efficient associates and was ranked 26th on Transport Topics’ list of top LTL carriers in 20212.
Knight-Swift price target raised to $70 from $65 at KeyBanc
On November 23, 2021, KeyBanc analyst Todd Fowler raised the firm’s price target on Knight-Swift to $70 from $65 and keeps an Overweight rating on the shares after coming away from meetings with management “incrementally constructive.” The analyst senses near-term fundamentals remain favorable, while opportunity within less-than-truckload may potentially buffer a cyclical truckload downturn. Fowler also gained “greater appreciation” for growth and margin potential with logistics and intermodal.
Knight-Swift upgraded to Buy from Neutral at UBS
On October 25, 2021, UBS analyst Thomas Wadewitz upgraded Knight-Swift Transporting to Buy from Neutral with a price target of $65, up from $51. The expansion of the company’s non-truckload business is occurring faster than anticipated and its “strong” free cash generation provides potential for further diversification through acquisitions, Wadewitz tells investors in a research note. He believes the “strong performance” in Knight-Swift’s non-TL businesses along with acquisitions can translate into a “changing valuation framework which supports a favorable” reward/risk for the shares.
KNX stock technical analysis
The short term is neutral, but the long term trend is still positive. There is a support zone ranging from 56.55 to 58.16. This zone is formed by a combination of multiple trend lines and important moving averages in multiple time frames. Not much to worry about for now. KNX has an excellent technical rating, but the quality of the setup is only medium at the moment. Price movement has been a little bit too volatile to find a nice entry and exit point. It is probably a good idea to wait for a consolidation first. Click here to sign up for email alerts on when KNX stock is a good entry.