Merrill Lynch downgraded Swift Transportation (SWFT) to neutral from buy.
Analyst Ken Hoexter says the company faces higher than expected cost headwinds, including driver pay and lower asset utilization. He says he is surprised at the depth of unseated tractors, which may cause Swift to cut its planned tractor growth (lowering future revenue growth rates). He feels that the bottom line is Swift missing its expected cost cutting targets, which was a significant focus of his buy rating.
Hoexter believes management reliability has taken a hard shot, and the shares will be hard pressed to outperform near term. He cuts his $1.15 2004 EPS estimate to 95 cents, and his $1.42 2005 forecast to $1.25.