J.B. Hunt Transport (JBHT) Up 7.1% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for J.B. Hunt Transport Services, Inc. JBHT. Shares have added about 7.1% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock’s next earnings release, or is it 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 drivers.

Fourth Quarter Earnings

J.B. Hunt's earnings of $0.97 per share (excluding a one-time after tax benefit) missed the Zacks Consensus Estimate of $1.

The bottom line dipped 4% on a year-over-year basis due to higher operating expenses. Total operating revenues increased 6% year over year to $1.72 billion and were ahead of the Zacks Consensus Estimate of $1.71 billion. Excluding fuel surcharges, operating revenues grew 6% year over year.

During the quarter, the company repurchased approximately 880,000 shares for $75 million. Operating income in the fourth quarter increased marginally to $194 million. Higher revenues in the Intermodal (JBI), Dedicated Contract Services (DCS) and Integrated Capacity Solutions (ICS) segments contributed to the increase in operating income in the quarter.

Segmental Performance

The Intermodal division reported quarterly revenues of $998 million, up 3% year over year. Overall volumes in the segment climbed 5%. Revenue per load, excluding fuel surcharge revenues, dipped 2%. Operating income decreased 3% year over year to $124 million.

Dedicated Contract Services revenues grew 8% year over year to $398 million. The company added new trucks to the fleet and customer retention rates remained above 98%. Operating income jumped 37% year over year to $57.5 million, mainly due to higher revenues and improved asset utilization.

Integrated Capacity Solutions revenues surged 22% year over year to $232 million on the back of 38% increase in load volumes. On a year-over-year basis, revenue per load plunged 12%. Operating income declined 52% to $6.1 million due to lower gross profit margin and higher costs.

Truck revenues decreased 3% to $96 million. At the end of 2016, the company operated 2,128 tractors, down marginally year over year. Operating income decreased 35% to $6.75 million due to lower customer rates per mile and higher costs.

Liquidity

At the end of 2016, cash and cash equivalents were $6.4 million compared with approximately $5.6 million at the end of 2015  Long-term debt was $986.3 million compared with $998 million at the end of 2015.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to three lower.

J.B. Hunt Transport Services, Inc. Price and Consensus

 

J.B. Hunt Transport Services, Inc. Price and Consensus | J.B. Hunt Transport Services, Inc. Quote

VGM Scores

At this time, J.B. Hunt Transport's stock has a great Growth score of 'A', though it is lagging a lot on the momentum front with an 'D'. 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 aggregte VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are looking for a below average return from the stock in the next few months.

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