Morgan Stanley maintains $75 stock target on Knight Transportation

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Morgan Stanley maintains $75 stock target on Knight Transportation
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On Tuesday, Morgan Stanley reaffirmed its Overweight rating and $75.00 price target for Knight Transportation (NYSE: KNX ), following the company's announcement of a significant leadership change.

Knight Transportation named Adam Miller as the new CEO, succeeding David Jackson who is stepping down after nine years in the role and 13 years as President. Alongside this transition, Andrew Hess (NYSE: HES ) will take over as CFO.

Adam Miller, who previously held the position of CFO at Knight Transportation, has been with the company for 22 years. His tenure includes overseeing financial strategies during the acquisitions of AAA Cooper, MME, and USX.

Andrew Hess, the incoming CFO, has a background as SVP of M&A involved in these acquisitions and as SVP of Finance at Swift Transportation. Miller plans to focus on expanding the company's less-than-truckload (LTL) services, improving margins, and enhancing stockholder returns.

The management change was a recent decision by the board and is seen as unexpected by market observers. Despite recent earnings not meeting expectations, the analyst believes the downcycle experienced by Knight Transportation is reflective of broader industry challenges rather than company-specific issues.

The outgoing CEO, David Jackson, is credited for diversifying the company into LTL and growing its logistics and intermodal segments, as well as the acquisition of USX.

Morgan Stanley's analyst suggests that the abrupt CEO change could be interpreted as the board's commitment to redirecting the company towards normalized earnings per share (EPS). The firm's positive outlook on Knight Transportation is supported by potential benefits from LTL growth, intermodal margin expansion, and the integration of USX.

Still, the new management team will need to regain the confidence of investors and demonstrate a clear strategy to achieve a $5 EPS target before the company's stock can align with the anticipated valuation of $75-80.

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