J. B. Hunt (JBHT) Continues to Grapple With Segmental Weakness
J.B. Hunt Transport Services, Inc.JBHT fourth-quarter 2023 revenues of $3,303.70 million surpassed the Zacks Consensus Estimate of $3,236.2 million but fell 9.5% year over year. Total operating revenues, excluding fuel surcharge revenue, fell 6% year over year. The downfall was due to a 12% and 7% decline in volume in Integrated Capacity Solutions (ICS) and Truckload (JBT), respectively, and a 10% and 13% decline in revenue per load excluding fuel surcharge revenue in Intermodal (JBI) and JBT, respectively, and a 12% decline in stops in Final Mile Services. These were partially offset by a 6% increase in volume in JBI, a 3% increase in productivity (revenue per truck per week excluding fuel surcharge revenue) in Dedicated Contract Services, and the revenue contribution from the acquisition of the brokerage assets of BNSF Logistics.
Higher net interest expense is likely to mar J.B. Hunt’s bottom line. JBHT continues to incur higher interest expenses owing to higher interest rates and debt issuance costs. Net interest expense for 2023 increased 16.2% year over year due to higher effective interest rates.
J.B. Hunt’s weak cash position is worrisome. JBHT's cash and cash equivalents stood at $53.34 million at the end of the fourth quarter of 2023, much lower than the long-term debt of $1,326.10 million.
Partly due to these headwinds, shares of JBHT, despite gaining 11.1%, have underperformed its industry’s growth of 28.1% in the past year.
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On the flip side, we are impressed by the company’s efforts to reward its shareholders through dividend payments and share repurchases. Concurrent with the fourth quarter of 2023 earnings release, JBHT’s board of directors has approved a dividend hike of 2%, thereby raising its quarterly cash dividend from 42 cents per share to 43 cents. The raised dividend will be paid out on Feb 23, 2024, to all its shareholders of record as of Feb 9, 2024. The move reflects JBHT’s intention to utilize free cash to enhance its shareholders’ returns. The company is also active on the buyback front, having resumed the same in the fourth quarter of 2020 after a temporary pause amid coronavirus concerns. In the fourth quarter of 2023, JBHT purchased almost 137,000 shares for $25 million. As of Dec 31, 2023, JBHT had approximately $392 million remaining under its share repurchase authorization.
Declining operating expenses due to lower fuel costs, purchased transportation costs, and salaries, wages and benefits expenses, have the potential to boost J.B. Hunt's bottom line. During 2023, operating expenses fell 12.2% year over year.
Zacks Rank and Stocks to Consider
J.B. Hunt currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks from the Zacks Transportation sector are Westinghouse Air Brake Technologies Corporation, operating as Wabtec Corporation WAB and SkyWest, Inc. SKYW. Each stock presently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Wabtec has an expected earnings growth rate of 12.70% for 2024. WAB delivered a trailing four-quarter earnings surprise of 7.11%, on average.
The Zacks Consensus Estimate for WAB’s 2024 earnings has improved 2.9% over the past 90 days. Shares of WAB have gained 27.1% in the past year.
SkyWest's fleet-modernization efforts are commendable. The Zacks Consensus Estimate for SKYW’s 2024 earnings has improved 6.3% over the past 90 days. Shares of SKYW have surged 216.9% in the past year.
SKYW has an expected earnings growth rate of more than 100% for 2024. SKYW delivered a trailing four-quarter earnings surprise of 128.02%, on average.
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