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UPDATE: UBS Starts Knight (KNX), Swift Transportation (SWFT) at Buy; Heartland Express (HTLD) Initated at Sell, Werner (WERN) at Neutral

February 18, 2015 7:20 AM EST
Get Alerts KNX Hot Sheet
Price: $52.62 -2.81%

Rating Summary:
    18 Buy, 11 Hold, 0 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 8 | Down: 2 | New: 35
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(Updated - February 18, 2015 8:47 AM EST)

UBS initiated coverage on Knight Transportation (NYSE: KNX) and Swift Transportation (NYSE: SWFT) at Buy. Werner Enterprises (NASDAQ: WERN) was initiated at Neural, and Heartland Express, Inc. (NASDAQ: HTLD) was initiated at Sell. Analyst Thomas Wadewitz thinks pricing strength supports upside to EPS.

"In 2014 the truckload market tightened significantly and spot market rates stepped up versus the prior level. We expect the delay in transmission from the spot market to the contract market should support rates in 2015 analogous to the multi-year profile of rising TL rates during the last cycle (2003 – 2006). In our view, concern about a more muted spot market in January 2015 is overdone as the polar vortex weather pattern in January 2014 was unusual and it resulted in a significant disruption to capacity. With the exception of HTLD, our EPS estimates are modestly above Consensus and risk is to the upside relative to the ~100 bp or less of OR improvement we model in 2015," said Wadewitz.

"We expect all of the TL names to benefit from strong pricing but we have more conviction in upside for KNX due to added levers from potential for additional acquisitions and growth in brokerage and for SWFT through margin healing in Dedicated & CRS along with lower interest expense. We believe Consensus EPS is significantly too high for HTLD due to culling of low margin freight and a likely step down in gain on sale of used equipment. We anticipate a modest drift down in valuation for the TL names with the exception of SWFT where the 25% discount to TL group valuation could narrow," he added.

For an analyst ratings summary and ratings history on Knight Transportation click here. For more ratings news on Knight Transportation click here.

Shares of Knight Transportation closed at $32.30 yesterday.



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