Swift Transportation Co. :SWFT-US: Earnings Analysis: 2016 By the Numbers : March 10, 2017

Swift Transportation Co. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Swift Transportation Co. – USA Truck, Inc., Celadon Group, Inc., Heartland Express, Inc., J.B. Hunt Transport Services, Inc., Covenant Transportation Group, Inc. Class A, Knight Transportation, Inc., Universal Logistics Holdings, Inc., Werner Enterprises, Inc. and Marten Transport, Ltd. (USAK-US, CGI-US, HTLD-US, JBHT-US, CVTI-US, KNX-US, ULH-US, WERN-US and MRTN-US) that have also reported for this period.

Highlights

  • Gross margins narrowed from 16.30% to 13.75% compared to the same period last year, operating (EBITDA) margins now 12.61% from 14.45%.
  • Year-on-year change in operating cash flow of -18.12% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 4031.52 4229.32 4298.72 4118.2 3493.18
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 149.27 197.58 161.15 155.42 140.09
Earnings Growth (YOY) -24.45 22.6 3.69 10.95 54.71
Net Margin 3.7 4.67 3.75 3.77 4.01
EPS 1.1 1.38 1.12 1.09 1
Return on Equity 23.15 36.34 42.75 60.51 88.58
Return on Assets 5.27 6.74 5.61 5.71 5.32

Access our Ratings and Scores for Swift Transportation Co.

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 16.30% to 13.75%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 14.45% to 12.61% in this time frame. For comparison, gross margins were 16.30% and EBITDA margins were 14.45% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

SWFT-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 25.02 days from 29.55 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

SWFT-US‘s change in operating cash flow of -18.12% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 8.10% to 5.57% and (2) one-time items that contributed to a decrease in pretax margins from 7.49% to 5.33%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Swift Transportation Co. engages in the provision of transportation solutions. It operates through the following segments: Truckload, Dedicated, Central Refrigerated, and Intermodal. The Truckload segment consists of one-way movements over irregular routes throughout the United States, Mexico, and Canada. The Dedicated segment offers tailored solutions under long-term contracts. The Central Refrigerated segment consists of shipments for customers that require temperature-controlled trailers. The Intermodal segment includes revenues generated by moving freight over the rail in the company’s containers and other trailing equipment, and revenues for drayage to transport loads between the railheads and customer locations. The company was founded by Jerry C. Moyes in 1966 and is headquartered in Phoenix, AZ.

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