Knight-Swift Transportation Holdings Inc.

KNX Details

Knight-Swift Transportation Holdings Inc. (NYSE: KNX) is one of the largest and most diverse freight transportation firms in North America, with the broadest truckload fleet. To serve customers across North America, the firm offers various truckload transportation, intermodal, and logistics services through a countrywide network of business units and ports in the United States and Mexico.

Latest News:

• Dividend Declaration: On November 04, 2021, KNX announced a quarterly cash dividend of USD 0.10 per share, payable on December 27, 2021, to shareholders of record on December 03, 2021.
• Expansion Endeavors: On October 18, 2021, AAA Cooper Transportation, a subsidiary of KNX, stated that it would increase its LTL capacity by building a service facility in St. Louis, Missouri, this autumn. With this development, the company, which serves five states bordering Missouri – Illinois, Kentucky, Tennessee, Arkansas, and Oklahoma – increases its service capacity for LTL and dedicated services in the Midwest.

Robust 9MFY21 Results:

• Boost in Revenue: KNX's total revenues (including fuel surcharge) during 9MFY21 (ended September 30, 2021) were USD 4.18 billion, up 23.12% from USD 3.40 billion during 9MFY20.
• Rise in Net Income: During 9MFY21, the company's net income was USD 489.14 million, an improvement from USD 268.25 million during 9MFY20.
• Progress in ARPT: KNX witnessed an increase in Average Revenue Per Tractor (ARPT) to USD 149.03 million during 9MFY21 from USD 137.74 million during 9MFY20.

Key Risks:

• Customer Concentration Risk: The freight carrier's top client provided 16.8%, 13.3%, and 14.6% of total revenue in FY20, FY19, and FY18, respectively. The company's financial and operational health may be compromised in the future if it is overly reliant on a single customer for revenue.

Outlook:

• FY21 EPS Estimate: According to its Q3FY21 press release, KNX expects its adjusted EPS for FY21 to be between USD 4.50 – 4.55, based on expected future profits from ACT and UTXL businesses and current truckload LTL and prevailing market circumstances.
• Net Cash Capex: It also expects its net cash capex in FY21 to range from USD 450 – 470 million, with a tax rate of roughly 25.0%.

Valuation Methodology: EV/EBITDA per share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

KNX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

KNX's share price has surged 37.99% in the past twelve months and is currently leaning towards the higher band of the 52-week range of USD 39.17 to USD 60.60. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 61.95. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 50.40.

Considering the uptick in the stock price, current valuation, and other technical indicators, we believe the decent business fundamentals are sufficiently reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 58.84, down 0.41% as of November 17, 2021, 3:41 PM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

 

CURO Group Holdings Corp.

CURO Details

CURO Group Holdings Corp. (NYSE: CURO) is a tech-enabled, omni-channel consumer finance firm offering its services to a broad range of non-prime and prime clients in the US and Canada. It provides various consumer financial products such as secured and unsecured installment loans, open-end loans, and single-pay loans. CURO maintains 160 US retail locations with an online presence in 27 states and 201 Canadian outlets with an online presence in 8 provinces as of September 30, 2021.

Latest News:

• Acquisition of Heights Finance: On November 17, 2021, CURO announced that it entered into a contractual deal with Milestone Partners, a private equity firm located in Radnor, Pennsylvania, to acquire Heights Finance, a provider of installment loans and other financial products. The total transaction value is USD 360 million, including USD 335 million in cash and USD 25 million in CURO common stock.
• Senior Notes Offering: CURO announced on November 17, 2021, that it intends to offer an additional USD 225 million aggregate principal amount of its outstanding 7.500% Senior Secured Notes due 2028 (Add-On Notes) subject to the satisfaction of certain conditions and the release of proceeds from the escrow account.

9MFY21 Results:

• Slight Increase in Revenues: CURO reported a minor increase of 3.56% in net revenues to USD 441.50 million during 9MFY21 (ended September 30, 2021) compared to USD 426.34 million during 9MFY20, due to a decline in the provision of losses.
• Improvement in Net Income: CURO recorded a net income of USD 88.21 million during 9MFY21 vs. USD 71.26 million reported during 9MFY20.
• Fall in Adjusted EBITDA: The company witnessed a decrease in adjusted EBITDA to USD 151.70 million during 9MFY21 from USD 153.03 million during 9MFY20.

Key Risks:

• Geographic Concentration: The company generated 22.6%, 13.6%, and 16.6% of its total FY20 revenue from Texas, California, and Ontario, respectively, which states also contributed 24.6%, 18.4%, and 13.6% to the FY19 revenue. As a result, loan defaults by consumers from these regions might jeopardize the company's operational and financial conditions.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's estimated NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CURO Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

CURO's share price has surged 112.84% in the past twelve months and is currently leaning towards the higher end of the 52-week range of USD 7.67 to USD 20.81. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 62.95. We have valued the stock using the Price/Earnings based relative valuation methodology and arrived at a target price of USD 18.28.

Considering the significant uptick in the stock price, current valuation, and other technical indicators, we believe the decent business fundamentals are sufficiently reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 19.31, up 11.23% as of November 17, 2021, 10:02 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.