Have you been paying attention to shares of Hub Group (HUBG)? Shares have been on the move with the stock up 18.8% over the past month. The stock hit a new 52-week high of $89.62 in the previous session. Hub Group has gained 3.2% since the start of the year compared to the -4.9% move for the Zacks Transportation sector and the -4.5% return for the Zacks Transportation - Services industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 3, 2022, Hub Group reported EPS of $3.03 versus consensus estimate of $2.53 while it beat the consensus revenue estimate by 4.69%.
For the current fiscal year, Hub Group is expected to post earnings of $10.27 per share on $5.61 billion in revenues. This represents a 102.96% change in EPS on a 32.5% change in revenues. For the next fiscal year, the company is expected to earn $7.89 per share on $5.46 billion in revenues. This represents a year-over-year change of -23.16% and -2.65%, respectively.
Hub Group may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Hub Group has a Value Score of A. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 8.5X current fiscal year EPS estimates, which is not in-line with the peer industry average of 13.6X. On a trailing cash flow basis, the stock currently trades at 9.9X versus its peer group's average of 7.3X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Hub Group currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Hub Group passes the test. Thus, it seems as though Hub Group shares could still be poised for more gains ahead.
How Does HUBG Stack Up to the Competition?
Shares of HUBG have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is C.H. Robinson Worldwide, Inc. (CHRW). CHRW has a Zacks Rank of # 1 (Strong Buy) and a Value Score of C, a Growth Score of B, and a Momentum Score of C.
Earnings were strong last quarter. C.H. Robinson Worldwide, Inc. beat our consensus estimate by 38.34%, and for the current fiscal year, CHRW is expected to post earnings of $8.48 per share on revenue of $26.41 billion.
Shares of C.H. Robinson Worldwide, Inc. have gained 16.5% over the past month, and currently trade at a forward P/E of 13.86X and a P/CF of 16.33X.
The Transportation - Services industry is in the top 16% of all the industries we have in our universe, so it looks like there are some nice tailwinds for HUBG and CHRW, even beyond their own solid fundamental situation.
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