Outlook For Swift: Tremendous Growth Prospects

| About: Swift Transportation (SWFT)

Swift Transportation Company (NYSE:SWFT) recently announced Q1 2013 earnings. The company's earnings improved from around $6 million in Q1 2012 to $23 million in Q1 2013. The growth was primarily driven by improvements in EBT margin, which has increased to 4.43% in Q1 2013, up from 0.36% in Q1 2012. This has come after the management's continuous commitment to improving efficiency and reducing leverage of the company.

Financial Data

FY 2012 was the most profitable year for the company since its initial listing on the New York Stock Exchange in 2010. The company has substantially improved upon what it achieved in Q1 2013. SWFT has shown improvement in all fields, as can be seen from the table above. It has experienced improved margins, EPS, revenues and income.

The company's liquidity position has improved significantly due to an increase in the company's cash and short-term investments in addition to a reduction in the company's current liabilities. The company's solvency position has also improved significantly as total assets are increasing and long-term liability has dropped.

As indicated earlier, the company has shown significant improvement in its liquidity position. The company's current ratio has improved from 1.69 in Q1 2012 to 1.80 in Q1 2013. Similarly, the quick ratio has also improved from 1.06 to 1.15 in Q1 2013. The company's operations have also improved with an increase in its total-asset and fixed-asset turnover ratio, when compared to Q1 a year ago. The company's solvency has also significantly improved. The company's interest coverage has gone up from a year ago, from 0.09 in 2012 to 1.46 in 2013. The company's debt level has reduced QoQ and YoY.

Cost Structure

The above table shows the most significant costs of the company. Although salary and wage expenses are a significant part of the company's expenses, it has remained stable as a proportion of total sales. Another significant portion of the company's costs is the purchased transportation expense. The amount has reduced as a percentage of sales because in the current quarter the company has used third party transportation less often. The company was able to do so because of improved efficiency in operations.

Fuel costs comprised around 18% of the company's total revenues. It has reduced as a percentage of revenues because of lower loaded miles operated by the company. As per the Economist Intelligence Unit's estimates, oil prices are expected to rise in the coming year, thus it is vital for the company to keep improving its efficiency in order to keep fuel costs low.

Segmental Performance

The truckload segment is the company's most profitable business and the largest contributor to its revenues. This segment saw a slight reduction in its performance as compared to Q1 2012 as the operating income decreased and operating ratio increased. The company also saw an increase in the deadhead miles percentage. However, the company has significantly improved efficiency as indicated by an increase in the weekly trucking revenue per tractor, going up from $3,028 to $3,182.

The dedicated segment has shown improvement YoY in terms of revenues and profitability. The company's operating ratio has also improved, showing an increase in efficiency. Another indicator of efficiency that has shown improvement is the weekly trucking revenue per tractor. This figure has not only shown an improvement YoY, but also an increase QoQ.

The intermodal segment has shown losses in the past. The segment's loss has narrowed and its operating ratio has fallen as compared to Q1 2012. The segment saw significant reduction in volume as compared to last year as indicated by the load count.


In my analysis, the company has improved significantly as a whole in terms of revenues and profits. The company has also reduced its debt levels over the years and has significantly improved its liquidity and solvency position. The highly seasonal nature of the business makes it difficult to predict the future, but the improving efficiency and cost savings are good indicators for the company. In my opinion, the company will be able to at least replicate its performance of last year, if not improve it. Thus, I would give a buy recommendation for the company.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.