A month has gone by since the last earnings report for JB Hunt (JBHT). Shares have added about 13.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is JB Hunt due for a pullback? 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 catalysts.
J.B. Hunt's Q4 Earnings & Revenues Beat Estimates
The company’s earnings (excluding 96 cents from non-recurring items) of $1.77 per share outpaced the Zacks Consensus Estimate of $1.48. However, increased costs associated with the ongoing arbitration with BNSF Railway Company hurt the bottom line.
Total operating revenues increased 16.5% year over year to $2,317.84 million and beat the Zacks Consensus Estimate of $2,297.8 million. The upside can be attributed to strong segmental performance.
Additionally, operating income decreased 15.8% to $122.74 million (on a reported basis) due to costs associated with rail purchase transportation. Also, operating ratio (operating expenses as a percentage of revenues) deteriorated to 94.7% from 92.7% in the prior-year quarter due to 19% rise in operating expenses from the year-ago quarter’s tally. Notably, effective tax rate increased to 20.5% sequentially in the quarter under discussion from 20.4% in the third quarter of 2018.
The Intermodal (JBI) division reported quarterly revenues of $1.26 billion, up 15% year over year. However, load volumes in the segment dipped 1%. Revenue per load excluding fuel surcharge revenues climbed 15% on a year-over-year basis. Operating income plunged 65% year over year, due to increased costs stemming from service delays and congestion.
Dedicated Contract Services (DCS) revenues rallied 25% year over year to $596 million. The company added 458 trucks to the fleet during the fourth quarter, while customer retention rates were above 98%. Operating income surged 70% year over year to $59.4 million due to addition of new trucks and increased productivity.
Integrated Capacity Solutions (ICS) revenues increased 7% year over year to $345 million. Revenue per load declined 6.4% year over year due to customer mix changes and reduced spot market activity compared with the year-ago quarter’s level. Meanwhile, volumes improved 14% year over year. The segment delivered an operating income of $16.1 million, up 43% year over year owing to higher gross profit margin.
Truck (JBT) revenues improved 21% year over year to $118 million. At the end of the fourth quarter, J.B. Hunt operated 2,112 tractors compared with 2,032 in the year-ago quarter. Trailers fell to 6,800 in the period compared with 7,120 a year ago. Operating income soared 131% to $14.7 million, courtesy of favorable factors like higher rates per loaded mile and lower equipment ownership costs.
The company exited 2018 with cash and cash equivalents of $7.6 million compared with $14.61 million at the end of 2017. Long-term debt was $898.4 million compared with $1.09 billion at 2017-end. Net capital expenditures for 2018 totaled $885 million compared with $511 million in 2017.
Capex for 2019 is estimated to be around $200 million less than the 2018 level. J.B. Hunt expects to allocate a major portion of Capex spending toward DCS and JBI segments and spend around $50 million for technological improvement in digital platforms.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, JB Hunt has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. 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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