Story updated at 10 a.m. to reflect market activity.
Knight Transportation fell 0.9% to $21.49 in morning trading.
Despite the downgrade, the analyst firm raised its price target for the trucking company to $25 from $23. The downgrade is because analyst Nicholas J. Bender believes the stock is fully valued.
"We are transferring coverage of Knight Transportation (KNX) with a Hold rating and $25 price target," Bender wrote. "Knight posted a strong 4Q13, and provided an optimistic outlook for 1H14. The improvement in the freight market was supported by commentary from other carriers, and thus we expect the core business to continue performing even while management searches for a tuck-in transaction.
"However, with the stock currently trading at 18.8x our above-consensus FY15 EPS estimate of $1.16 (in line with the 5-year average multiple and high-margin peers), valuation appears full. We do think a slight premium should be factored in for the potential of an accretive transaction, and thus we arrive at a $25 price target."
Separately, TheStreet Ratings team rates KNIGHT TRANSPORTATION INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate KNIGHT TRANSPORTATION INC (KNX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in net income and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."