Knight-Swift Transportation (CCJ Top 250, No. 3) management expressed a strong outlook for peak season as third-quarter results reflected a recovery in truckload margins.
During the company’s earnings call Wednesday, CEO Adam Miller said improvement in core truckload margins is “finally approaching recognizable territory after such a long and difficult down cycle.”
Knight-Swift posted net income of $118.3 million, up from $7.9 million a year earlier. Revenue rose 14.2% to $2.2 billion from $1.92 billion in the prior-year period. Excluding truckload and less-than-truckload (LTL) fuel surcharges, revenue grew 7.7%.
Operating income grew $178.7 million, up 255.1% from $50 million in the same period last year. The adjusted operating ratio improved 450 basis points to 89.3%.
The company attributes the upturn to supply, not demand. Miller said the one-way truckload market is tightening after “three-plus years where artificially low pricing drove unusually weak industry margins.”
Because Knight-Swift stayed committed to its one-way service, Miller said the company is well placed to serve customers in the part of the market where capacity has contracted the most.
“We have more peak season project arrangements in place than at any time since the pandemic,” Miller said, adding that customers “aren’t deviating from their forecasts.”
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The company said its spot rates have stayed well above contract rates and ahead of public indicators, and low tender rejection rates are trending stronger than broader market indicators.
Looking at 2027, Miller said national bids are largely finished. The new bid season starts in November.
“I certainly feel like we’re in a position to start with at least double-digit increases,” he said, putting the starting point at “probably low to mid double digits.”
The outcome, he said, depends on whether capacity keeps leaving the market, how demand develops, and when individual customer rates were last reset.
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Driver pay and fuel squeeze margins
Investors indicated concern that rising costs could consume rate gains.
Chief Financial Officer Andrew Hess pointed out that truckload revenue per total mile, excluding fuel surcharge, increased 12.2% year over year in the third quarter, up from 2.5% in the first quarter. Cost per mile rose between 3.3% and 3.8% through the first three quarters of 2026.
“The result is that 68% of our third quarter rate improvement flowed through to margin, up from 50% in the second quarter,” Hess said.
The fleet also operated more efficiently, as miles per seated tractor rose 2.7%, and empty miles fell 170 basis points.
Driver pay and fuel are the sharpest pressure, while insurance and claims continue to be volatile, Hess noted. Equipment pricing, which continues to rise, remains an open question under the new EPA regulation, Miller added.
The company said it has made targeted pay increases by market, fleet and tenure and is testing driver pay across its brands. It held fixed costs by consolidating real estate, using AI automation, cutting vendor costs and hiring fewer people for nondriver roles, though it has added to its recruiting department.
Miller said Knight-Swift is planning new academies and partner schools. It’s also using AI in recruiting and onboarding.
Segment performance
Truckload: Revenue, excluding fuel surcharge, rose 6.5% to $1.15 billion, the segment’s strongest organic growth in more than four years. Revenue per loaded mile rose 9.7%, partly offset by a 3% drop in loaded miles. Adjusted operating income grew 202.3% to $124.6 million, and the adjusted operating ratio improved to 89.2% from 96.2%. Hess noted that one-way margins exceeded dedicated margins for the first time in a few years.
U.S. Xpress continued its recovery. Its over-the-road division reached a mid-90s adjusted operating ratio, helping bring total U.S. Xpress trucking into the low 90s, while the legacy brands posted an 88% adjusted operating ratio.
LTL: Revenue excluding fuel surcharge rose 0.4% to $341.7 million as a 4% increase in revenue per shipment was largely offset by a 1.4% decline in shipments per day. The adjusted operating ratio worsened 80 basis points to 91.4%, and adjusted operating income fell 8.4% to $29.4 million, primarily because of a $4.6 million decrease in gains on sale.
Logistics: Revenue slipped 1% to $139 million, but adjusted operating income grew 19.6% to $9.6 million. Revenue per load rose 46.7% while load count fell 32.6% as the company held to disciplined pricing and carrier selection.
Intermodal: Revenue grew 30.6% to $122.9 million on a 13.3% increase in load count, the highest in more than five years. Revenue per load rose 15.2% or 5% excluding fuel surcharge. The adjusted operating ratio improved 200 basis points to 97.8%.
Miller said he expects momentum to continue.
“We expect that ongoing cost inflation and constraints on capacity will require further meaningful rate growth in 2027 to support margin repair and investments in fleet assets," he said.
