Issue #35

Analysts see big upside as the trucking cycle turns. We break down the top opportunities.

The U.S. freight market is stuck in one of its toughest downturns in years — weak volumes, soft pricing, and rising costs have pushed the industry into a full-blown “freight recession.” But for long-term investors, these moments often reveal the strongest opportunities. Two of America’s biggest transportation giants are quietly positioning themselves for a powerful rebound as the cycle begins to shift.

👉 One is the nation’s largest full-truckload carrier, integrating a major acquisition and expanding aggressively into higher-margin LTL.
👉 The other is a multimodal powerhouse, using Intermodal and Dedicated freight to weather the downturn better than most.
👉 Both are trading at deep discounts while analysts project meaningful upside as capacity tightens and pricing power returns.

In this edition, we break down Knight-Swift (KNX) and Schneider National (SNDR) — two transportation leaders building momentum at the bottom of the cycle.

Knight-Swift Transportation (NYSE: KNX)

Knight-Swift Transportation, America's largest full-truckload (FTL) carrier, is a key player in the ground transportation industry. Its scale and diversified offerings make it a foundational element of the nation's supply chain, though its performance is inextricably linked to the volatile freight cycle.

Business Model and Revenue Streams 📦

Knight-Swift's business model is centered on providing a comprehensive suite of transportation and logistics solutions, leveraging its massive, integrated network for efficiency and customer service. Its strategy is built on scale, operational excellence, and brand diversification.

The company's primary revenue streams are segmented into the following core areas:

• Truckload (TL) Services: This is the largest segment, comprising full-truckload freight movement across various divisions, including dry van, refrigerated, and specialized freight. Revenue is generated per mile driven or per load transported. The scale of its fleet provides operational leverage and cost-per-mile advantages.
• Less-Than-Truckload (LTL) Services: This segment, significantly expanded through recent acquisitions, involves consolidating smaller shipments from multiple customers onto a single trailer. LTL is a higher-margin but more complex business, relying on a dense network of terminals and efficient hub-and-spoke operations.
• Logistics/Brokerage: This asset-light segment connects shippers with third-party carriers, generating revenue through commissions or markups on the brokered freight. This segment provides flexibility and can perform well when its own truckload capacity is tight.
• Intermodal and Other Services: Includes container shipping combining rail and truck transportation, as well as equipment sales and leasing.

Macroeconomic Impact on KNX

The trucking industry is a leading indicator of the broader economy, and KNX's performance is highly sensitive to macroeconomic policies and conditions:

• Weak Freight Demand: The current macro environment is characterized by a "freight recession" or soft demand, where shipping volumes and pricing (rates) are depressed. This is a direct result of inventory destocking by retailers, cautious consumer spending, and slowing industrial output. This directly pressures the margins and volumes in KNX's core Truckload segment.
• Interest Rates and Capacity: Higher interest rates (monetary policy) discourage capital expenditure and drive up the cost of financing for smaller carriers. This contributes to industry capacity tightening, as smaller, less-resourced fleets exit the market. While this is a short-term headwind (fewer loads to haul), it is a long-term benefit, as reduced competition will eventually allow large carriers like KNX to command higher contract rates once demand recovers.
• Fuel Costs and Inflation: Fluctuations in diesel fuel prices directly impact operating costs. While most trucking contracts include fuel surcharges, there can be a lag in recovery. Inflationary pressures also increase costs for labor (driver wages) and new equipment.

Recent Performance and Corporate Developments 📈

Knight-Swift has been actively consolidating its market position and focusing on strategic expansion, particularly into the LTL space.

Strategic Initiatives and Mergers: 🤝

• U.S. Xpress Acquisition (2023): The most significant recent corporate development was the acquisition of U.S. Xpress Enterprises. This merger added substantial scale to its truckload operations and is key to its strategy of realizing massive synergy and operational improvements by applying the successful "Knight-Swift playbook" to an underperforming asset. The integration process, however, has been a short-term drag on earnings due to associated costs.
• LTL Expansion (AAA Cooper): Following the successful integration of its AAA Cooper acquisition, the company is continuing to build out its LTL network. This is a high-growth, high-margin strategic shift designed to diversify its revenue away from the more cyclical Truckload segment.

Recent Quarterly Performance: 💰

KNX's recent performance reflects the difficult operating environment combined with the costs of strategic integration:

• Freight Cycle Play: KNX's current performance is suppressed by a "freight recession," but analysts view the stock as a Buy on expectations of a strong cyclical rebound.
• Strategic Expansion: The company is integrating the U.S. Xpress acquisition and aggressively building its high-margin LTL network for long-term growth and diversification.
• Analyst Confidence: Despite short-term earnings misses, KNX maintains a consensus "Buy" rating, with an average 12-month price target suggesting significant potential upside.

The Q3 2025 results were a disappointment, with both EPS and Revenue missing consensus estimates. Management's guidance for Q4 also reflected ongoing pressure from soft freight demand and the persistence of integration costs. This highlights the current challenge of the cyclical downturn offsetting the long-term benefits of the acquisitions.

Path to Profitability and Fair Value 🎯

KNX's profitability is already established, but its path to improved profitability and sustained growth centers on three key factors:

1. Truckload Market Recovery: The primary catalyst will be a shift in the freight cycle from excess capacity to tightening capacity, which will enable KNX to significantly raise contract rates in its dominant Truckload segment.
2. U.S. Xpress Integration Synergies: Successful and timely realization of the targeted operational improvements and cost synergies from the U.S. Xpress acquisition is crucial for boosting the overall Truckload segment's operating ratio.
3. LTL Network Buildout: The ongoing strategic investment in expanding the high-margin LTL business (AAA Cooper and affiliates) will serve as a long-term stabilizer and growth engine, reducing reliance on the volatile Truckload market.

Valuation and Analyst Estimates 📊

In terms of fair value, the stock currently trades at a high trailing P/E ratio (approx. 50.5x), but a much lower forward P/E (approx. 20.9x), reflecting the expectation of a significant rebound in earnings over the next year as the freight market recovers and synergies are realized. Many analysts view the stock as undervalued relative to its long-term earnings power and potential for market consolidation.

• Consensus Rating: The consensus rating is a "Buy" or "Moderate Buy." The majority of analysts (approx. 77% Strong Buy/Buy) recommend buying the stock, betting on the cyclical recovery and the company's LTL growth strategy.
• Recent Analyst Action (Last 30 Days): Notably, several firms, including BofA Securities and TD Cowen, have reiterated or upgraded their rating to Buy following the Q3 earnings, suggesting that the short-term earnings miss is seen as a buying opportunity based on the strong long-term outlook.
• Price Target: The average 12-month price target is approximately $53.83, representing a significant potential upside from the current price (around $44.17 as of November 21, 2025).

Investor-Focused Takeaway: Is KNX Right for Your Portfolio?

Knight-Swift Transportation is a play on the inevitable recovery of the U.S. freight cycle, buttressed by a strategic move into the higher-margin LTL sector. The stock is currently trading at a discount based on analyst expectations, but investors must tolerate near-term volatility and integration risks.

What to Watch in the Near Term: 📈

• Freight Volume and Pricing: Monitor indicators for the broader U.S. truckload market to signal the bottom of the current downturn.
• U.S. Xpress Integration Progress: Look for updates on synergy realization and operating ratio improvement in the acquired Truckload segment.
• LTL Segment Margin: Continued margin expansion in the LTL segment is crucial for demonstrating the long-term value of the diversification strategy.

Recommendation:

Knight-Swift (KNX) is recommended as a Buy for investors with a medium to long-term horizon who are confident in the eventual recovery of the U.S. trucking cycle and the company's ability to execute its integration and LTL growth strategies. The stock represents a quality industry leader that is capitalizing on a downturn to expand its long-term competitive moat.

Schneider National (NYSE: SNDR)

Schneider National is one of North America's largest multimodal transportation and logistics providers. Unlike pure-play truckload carriers, its significant exposure to the Intermodal and Dedicated freight sectors provides a degree of stability, though it is not immune to the severe industry-wide pressures currently impacting margins.

Business Model and Revenue Streams 📦

Schneider's business model is strategically built on a multimodal platform, giving it the flexibility to service customers across multiple transportation methods and supply chain needs. Its goal is to provide reliable, data-driven solutions that reduce customer complexity.

The company generates revenue across three primary, highly interconnected segments:

• Truckload (TL) Services: This includes Dedicated (fixed contracts with customers) and Network (traditional over-the-road freight). The Dedicated business is higher-margin and less volatile, representing a critical focus area and a growing percentage of its fleet (approaching 70%). The recent acquisition of Cowan Systems heavily bolstered this segment.
• Intermodal Services: This involves shipping freight via rail for the long-haul portion, primarily using its own containers. This segment benefits from strong volume growth and is viewed as a more environmentally friendly and often more cost-effective option than long-haul trucking, which helps it capture market share.
• Logistics Services: This asset-light segment provides freight brokerage, supply chain management, and consulting. It leverages the company's proprietary digital platform, Schneider FreightPower, to match shipper demand with third-party capacity.

Macroeconomic Impact on SNDR

Schneider is navigating a challenging macroeconomic environment characterized by weak freight market conditions, which is causing a significant margin squeeze:

• Weak Freight Demand and Pricing: The ongoing "freight recession" has led to sub-seasonal volumes and aggressive pricing competition in the Network Truckload and Logistics segments. This directly pressures revenue per truck per week.
• Cost Inflation: Despite soft demand, the company faces rising costs, particularly in insurance claims (a key factor in the recent Q3 miss), driver wages, and equipment maintenance. Monetary policies that drive up the cost of capital also indirectly affect the industry's cost structure.
• Policy Impacts (Tariffs): Recent talk of new tariffs on imported trucks could significantly increase the cost of acquiring new Class 8 vehicles, which would accelerate the removal of older capacity from the market. While this is a short-term cost risk, the resulting long-term tightening of industry capacity is a positive catalyst for future pricing power.

Recent Performance and Corporate Developments 📈

Schneider's recent activity is defined by a major acquisition and a challenging earnings environment despite revenue growth.

Strategic Initiatives and Mergers: 🤝

• Cowan Systems Acquisition (Late 2024): This was a major strategic move, significantly expanding Schneider's Dedicated Truckload operations. The acquisition is a primary driver of recent revenue growth and is expected to provide accretive earnings and cost synergies over the long term. This acquisition is critical to its strategy of shifting the mix towards stable contract freight.
• Focus on Intermodal and Technology: Schneider is emphasizing its high-growth Intermodal segment, noting strong volume growth (especially on North-South trade lanes to Mexico). It is also leveraging AI and its digital platform, Fast Track, to boost productivity and offer premium, reliable freight service options.

Q3 2025 Financial Performance: 💰

Schneider reported a mixed Q3 2025, demonstrating the current challenges of the sector:

• Multimodal Resilience: Strategic segments (Intermodal and Dedicated Truckload) showed volume/revenue growth, providing stability against the weak freight market.
• Margin Squeeze: Overall profitability was hit by integration friction from the Cowan acquisition and unexpectedly high claims costs, leading to an EPS miss.
• Focus on Recovery: The company's future value rests on realizing Cowan synergies, managing costs, and benefiting from the eventual freight market rebound.

Earnings Miss: Adjusted EPS of $0.12 significantly missed the consensus estimate of $0.20, primarily due to an unexpected $16 million in claims-related costs.

• Revenue Beat: Total revenue of $1.45 billion slightly beat estimates, driven by the Cowan acquisition volume.
• Guidance Cut: Management lowered the full-year 2025 adjusted EPS guidance to approximately $0.70 (from a prior range of $0.75 to $0.95), reflecting the extended nature of the sub-seasonal freight market.

Path to Profitability and Fair Value 🎯

Schneider is an established, profitable company, but its path to margin restoration and substantial earnings growth is tied to external market forces and internal cost discipline.

1. Freight Market Rebalance: The single greatest driver of profit recovery is the eventual tightening of freight capacity (due to bankruptcies, lower truck production, and regulations) and the resulting return of pricing power.
2. Cost and Efficiency Gains: Aggressive cost containment, non-driver headcount reduction, and the realization of synergy benefits from the Cowan acquisition are key internal levers for margin improvement.
3. Dedicated/Intermodal Mix: Continued expansion of its more resilient Dedicated and Intermodal segments will provide structural earnings stability and higher returns across market cycles.

In terms of fair value, the stock appears undervalued by several models, given its strong balance sheet and dominant market position. The trailing P/E ratio is high (approx. 33.7x) due to depressed current earnings, but analysts are focused on its forward earnings potential.

• Consensus Rating: The consensus rating is generally an "Outperform" or "Moderate Buy." While the short-term outlook is cautious, the long-term view is bullish on the company's strategic positioning.
• Recent Analyst Action (Last 30 Days): The stock saw some downgrades after the Q3 miss due to the lowered guidance, yet the overall consensus remains positive, indicating analysts view the challenges as transient and related to the cycle.
• Price Target: The average 12-month price target is approximately $25.42, suggesting a noticeable upside from the current share price (around $21.65). Long-term forecasts anticipate a significant jump in EPS (to around $1.15 in FY 2026).

Investor-Focused Takeaway: Is SNDR Right for Your Portfolio?

Schneider National represents a resilient, well-diversified play in the transportation sector. Its strong focus on Dedicated and Intermodal protects it better than most during a downturn, and its recent strategic acquisition positions it for aggressive leverage when the cycle inevitably turns up.

What to Watch in the Near Term: 📈

• Insurance and Claims Costs: Monitor for stabilization or reduction in claims-related costs, which was a major surprise headwind in Q3.
• Dedicated Growth: Look for continued strong volume and successful integration of the Cowan systems to solidify the high-margin revenue base.
• Industry Capacity: Watch for key indicators (like carrier bankruptcies and Class 8 truck orders) that signal the beginning of the capacity rationalization required for the freight market to recover.

Recommendation:

Schneider National (SNDR) is a Buy for investors seeking exposure to a high-quality, diversified carrier that is strategically investing through a downturn. While the current margin environment is challenging, its focus on Dedicated contracts and Intermodal strength provides a clearer path to margin recovery than many pure-play Truckload competitors.

Final Take: Two Trucking Giants Positioned for a 2026 Freight Rebound

As the freight recession drags on, Knight-Swift (KNX) and Schneider National (SNDR) are laying the groundwork for a powerful comeback — each executing disciplined strategies designed to outperform when volumes bounce and pricing power returns.

One is using the downturn to scale aggressively into higher-margin freight.
The other is leaning on its Intermodal and Dedicated freight strength to weather the storm and emerge leaner and more profitable.

🟣 Knight-Swift (KNX) – Scaling Into Strength
✔ U.S. Xpress integration creating long-term truckload synergy
✔ Building a high-margin LTL network with national reach
✔ Analysts project over 20% upside as cycle turns
➤ Best for: Investors who want to play the full freight-cycle recovery with the industry's most scaled operator.

🟠 Schneider National (SNDR) – Diversified, Durable, Undervalued
✔ Dedicated fleet and Intermodal volumes remain resilient
✔ Positioned for cost recovery and market share growth in 2026
✔ EPS set to rebound sharply as market tightens
➤ Best for: Long-term holders seeking stability, optionality, and upside through freight volatility.

Investor Insight:

📈 Want exposure to freight's full recovery via Truckload + LTL scale? → KNX
​ 🚂 Want diversified, contract-heavy stability with upside optionality? → SNDR

Both are oversold, underappreciated, and building momentum at the bottom of the cycle — giving investors a chance to ride the next trucking upcycle from the ground floor.

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Happy Trading
​— Team Premium Stock Alerts