Knight-Swift Transportation, the nation’s largest carrier, has proved too little for investors. The dropping sentiment for truckload stocks was on display this past Wednesday.

Knight-Swift Took Advantage of Strong Fundamentals

The stock gapped 7% lower by midday this past Wednesday. Even though the company capitalized on strong fundamentals in the quarter to post results well ahead of the 2019 fourth quarter.

Reported adjusted earnings were at per share of 94 cents, the Phoenix-based company was only slightly ahead of the 91-cent consensus estimate. This was significantly outpacing 55 cents from a year ago. In fact, the company did confirm the 2021 adjusted EPS guidance of $3.20 to $3.40. This is in line with the consensus of $3.36.

TL Stocks are Up

From September highs, TL stocks have backed up. Analysts turned the page to the new year. There are hopes of a more pronounced recovery in the industrial economy. They favor less-than-truckload and railroad stocks.

In fact, many investors have had concerns that the potent days of lofty demand and rising rates are coming to a close. The current spike in truck orders will damage the current strained capacity backdrop sooner than later.

In fact, the remainder of the TL stocks were down low-to to mid-single-digit percentages midday with the 2021 favorites, the LTLs. It was off by close to the same amount. Therefore, the S&P 500 was off more than 2%.

In a note to clients on Wednesday, Deutsche Bank securities analyst Amit Mehrotra said the result was “about as sold as one can expect.” It goes to show that “earnings power is increasing cycle-over-cycle,” which “speaks to how the intrinsic value of the company is evolving, regardless of positioning.”

Intrinsic value doesn’t matter, maybe that’s right answer. Moreover, on the download move in the TL stocks. It’s all about sentiment, positioning and rate of change in spot rates. However, we are still more upbeat that underlying substantive earnings power over cycles is what is most important for the mid/long-term outlook of equities, Mehrotra said.