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The company managed to beat 2Q earnings consensus but miss on the top line.

We still remains bullish on the stock given the efficiency improvements and improvements in non-asset areas of the business.

Its recent strength is nothing new and part of what we expected given the market’s underestimation of the company’s ability to capture market share while improving margins.

Knight Transportation (NYSE:KNX) posted 2Q earnings of $0.31 (topping $0.27 consensus) and revenue came in at $264 million (missing $266 million consensus). Shares are flat over the last month, but the overall quarter was solid for Knight. Revenue per tractor was up 6% y/y with revenue per loaded mile up 5.6%. The operating ratio for the trucking business was up to 79% from 81.7% in 2Q 2013.

Shares are up 50% since we first covered Knight in August of last year. As we noted in August,

One of the big takeaways for the quarter and from Knight's comments is that the company is rapidly diversifying its revenue stream, specifically, non-asset revenues. Its non-asset businesses includes intermodal and brokerage services, and accounted for 20% of revenues during 2Q 2013, but this number could move to 50% over the next couple of years. Just 3 years ago, the non-asset based businesses comprised just 4% of total revenues.

During 2Q, its brokerage business revenues were up 64% y/y. Meanwhile, its intermodal business saw its operating ratio improve 470 bps from 1Q 2014.

Shares still trade at just 20x 2015 earnings estimates. Its long-term historical average P/E is 25x. The stock is now trading close to our $26 price target, but we believe the company's strong performance could put it closer to $31 a share over the next 12-18 months.