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Why Is JB Hunt (JBHT) Down 4.6% Since Last Earnings Report?

Zacks Equity Research
Fair Isaac (FICO) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

It has been about a month since the last earnings report for JB Hunt (JBHT). Shares have lost about 4.6% 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 catalysts.

J.B. Hunt's Q4 Earnings & Revenues Miss Estimates

The company’s earnings of $1.09 per share fell short of the Zacks Consensus Estimate of $1.25. However, the bottom line inched up 1.9% year over year.

Total operating revenues of $2.09 billion lagged the Zacks Consensus Estimate of $2.2 billion. However, the top line improved 7.3% year over year on a strong segmental performance.

Additionally, operating income (on a reported basis) dipped 1% to $168 million due to costs associated with rail purchase transportation. Also, operating ratio (operating expenses as a percentage of revenues) deteriorated to 92% from 91.3% in the prior-year quarter due to 8% rise in operating expenses from the year-ago quarter’s tally. Notably, effective tax rate decreased to 22.7% compared with 26% in the first quarter of 2018. For 2019, the same is expected to be 24%.

Segmental Performance

The Intermodal (JBI) division generated quarterly revenues of $1.09 billion, up 2% year over year. However, load volumes in the segment fell 7%. Revenue per load excluding fuel surcharge revenues climbed 11% on a year-over-year basis. Operating income declined 10% year over year due to increased rail purchased transportation costs and driver wages among other factors.

Dedicated Contract Services (DCS) revenues rose 22% year over year to $602 million. The company added 440 trucks to its fleet during the first quarter while customer retention rates were above 98%. Operating income increased 24% year over year to $50 million owing to the addition of new trucks and increased productivity.

Integrated Capacity Solutions (ICS) revenues were up 2% year over year to $301 million. Revenue per load declined 12% year over year due to customer mix changes and reduced spot market activity compared with the year-ago quarter’s level. Meanwhile, volumes expanded 15% year over year.  The segment delivered an operating income of $7 million, down 22% year over year due to higher personnel and technology costs.

Truck (JBT) revenues improved 10% year over year to $102 million. At the end of the first quarter, J.B. Hunt operated 2,043 tractors compared with 1,926 in the year-ago quarter. Trailers fell to 6,785 in the period compared with 7,036 a year ago. Operating income soared 41% to $7 million, courtesy of favorable factors like higher rates per loaded mile and lower equipment ownership costs.

Liquidity

The company exited the first quarter with cash and cash equivalents of $52.36 million compared with $7.6 million at the end of 2018. Long-term debt was $1.28 billion compared with $898.4 million at 2018 end. Net capital expenditures in the quarter under review totaled $212.15 million compared with $179.05 million in the prior-year period.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.01% due to these changes.

VGM Scores

Currently, JB Hunt has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise JB Hunt has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.



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