One of Warren Buffett's more famous quotes is: “Only when the tide goes out, do you learn who has been swimming naked.”
On that note, Knight-Swift Transportation (KNX) shareholders were assured earlier this year that earnings wouldn’t drop below $4 (even in a recession). Well, over the past two quarters, the trucking company’s floor has been nearly halved, dropping to $2.30 per share yesterday.
It’s another case of a cyclical company being exposed during truth-telling season.
“If you want to tell me that’s better than expected, I’ll say you’re unequivocally full of shit,” explains Keith McCullough in this clip from The Macro Show. “Moreover, this is a good company. You should be very concerned about the cyclicality of peak cycle earnings on inflation in the second half of last year, which is what Knight-Swift is actually comparing against.”
Hedgeye's CEO adds: "Inflation accelerating in Quad 2 is uber bullish. That’s why we were bullish in 2021. Now it’s uber bearish and the fallout is monstrous. So you either get it, and you got it right on KNX, or you don’t."
Watch the full clip above.
