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JB Hunt (JBHT) Down 7.4% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
Comtech Telecommunications (CMTL) closed the most recent trading day at $26.47, moving +1.26% from the previous trading session.

It has been about a month since the last earnings report for JB Hunt (JBHT). Shares have lost about 7.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is JB Hunt due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

J.B. Hunt's Q3 Earnings & Revenues Beat Estimates

The company’s earnings (excluding 28 cents from non-recurring items) of $1.47 per share outpaced the Zacks Consensus Estimate of $1.40, also comparing favorably with the year-ago figure of 91 cents. Lower effective tax rate aided the bottom line. Moreover, revenues increased 20% year over year to $2,209.76 million, surpassing the Zacks Consensus Estimate of $2,203.21 million.

Additionally, operating income rose 6% to $174.7 million (on a reported basis), backed by customer rate increases.

In the quarter under review, the company repurchased 422,000 shares for approximately $50 million. As of Sep 30, 2018, the company had around $421 million remaining under its share buyback program.

Segmental Performance

The Intermodal division reported quarterly revenues of $1.22 billion, up 16% year over year. Load volumes in the segment nudged up 1%. Revenue per load excluding fuel surcharge revenues climbed 12% on a year-over-year basis. Operating income ascended 10% year over year, driven by higher customer rates.

Dedicated Contract Services revenues increased 24% year over year to $543 million. The company added new trucks to the fleet during the second quarter while customer retention rates remained above 98%. Operating income dropped 18% year over year to $35 million due to increased driver wages, salaries and other benefits besides other costs.

Integrated Capacity Solutions revenues jumped 28% year over year to $346 million. Revenue per load declined 9% year over year due to an increased mix of contractual less-than-truckload volume compared with the year-ago quarter’s level. Meanwhile, volumes soared 41% year over year.  The segment delivered an operating income of $10.2 million, up 40% year over year owing to higher gross profit margin.

Truck revenues increased 14% to $106 million. At the end of the third quarter, J.B. Hunt operated 1,972 tractors compared with 2,040 a year ago while trailers decreased to 6,818 in the period compared with 7,538 a year ago. Operating income soared 61% to $9.2 million, courtesy of favorable factors like higher rates per loaded mile and lower equipment ownership costs.

Effective tax rate fell to 20.4% in the quarter under discussion from 35.9% a year ago. The company anticipates effective tax rate to be approximately 24% this year. At the end of the third quarter, cash and cash equivalents were $7.59 million compared with approximately $14.61 million at the end of 2017. Long-term debt was $820.86 million compared with $1.09 billion at 2017-end. Net capital expenditures during the first nine months of 2018 totaled $585 million compared with $315 million in the same period last year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, JB Hunt has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, JB Hunt has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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