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J.B. Hunt Transport Services Inc. (JBHT - Analyst Report), one of the largest U.S. truckload carriers, reported fourth-quarter 2013 earnings of 77 cents per share, missing the Zacks Consensus Estimate of 79 cents. Earnings per share grew 10% from 70 cents earned in the year-ago quarter.

Total revenue increased 10% year over year to $1.47 billion but marginally fell short of the Zacks Consensus Estimate of $1.48 billion.

For full year 2013, the company reported earnings per share of $2.87, up 11% and revenues of $5.6 billion, representing a growth of 10% year over year.

Operating income for the quarter increased 7% year over year to $153.5 million and for 2013, the same increased 9% year over year to $576.7 million.

Segment Results

Intermodal reported quarterly revenues of $915 million, up 11% year over year on a 13% increase in load count. Increase in freight price and fuel surcharges along with a better traffic mix aided revenue growth. The average tractor count increased to 4,084 from 3,582 in the year-ago quarter. Operating income climbed 17% year over year to $121.5 million.

Dedicated Contract Services revenues grew 17% year over year to $331 million in the fourth quarter given addition of higher numbers of revenue-generating trucks resulting from conversion of private fleet. The average truck count was 6,271 against 5,057 in the year-ago quarter.

Operating income inched up 0.5% year over year to $29.5 million. The growth was buoyed by increase in sales from new accounts, partially offset by higher driver wages, recruitment costs, and less gains from the sale of revenue equipments from the year-ago quarter.

Integrated Capacity Solutions revenues grew 13% year over year to $145 million attributable to a 5% increase in load volume and 7% growth in revenue per load. Operating income decreased 24% year over year to $3.5 million due to a decline in gross profit margin. On a year-over-year basis, the carrier base rose 7% and employee count grew 11%.

Truck revenues dropped 19% year over year to $91 million given 11% decline in fleet size, decreased utilization per truck and lower rates per mile. The average tractor count reduced to 2,007 from 2,435 in the year-ago quarter. Rates from shippers registered a year-over-year decline of 1%. The average length of haul decreased 4.6%. The company reported operating loss of 1.0 million as against operating profit of $5.2 million in the year-ago quarter

The decline was mainly due to lower asset utilization, higher wages per mile for drivers, higher independent contractor costs and higher maintenance cost per unit. These headwinds ultimately offset the positive impact of the lower idle trailing equipment, reduced empty miles per load and reductions in headcounts.

Liquidity

At the end of the year, cash and cash equivalents increased to $5.8 million from $5.6 million at year-end 2012. Total debt was $708 million compared with $685.0 million at the end of 2012.

Capital expenditure for 2013 were $443 million against $370 million at the end of 2012.

Share Repurchase

In the fourth quarter, the company repurchased 675,000 shares worth $50 million.  As of Dec 31, 2013, the company had approximately $338 million worth of shares remaining under its repurchase authorization.

Our Analysis

We also appreciate the company’s efforts to expand its brand to unexplored territories. However, a competitive scenario, higher staff retention costs and a deteriorating truck business limit its upside potential. 

J.B. Hunt currently carries a Zacks Rank #4 (Sell). However, better-ranked stocks worth considering within the same sector are P.A.M Transportation Services Inc. (PTSI) and Universal Truckload Services Inc. (UACL - Snapshot Report), both with a Zacks Rank #1 (Strong Buy) as well as Arkansas Best Corp. (ABFS - Snapshot Report) with a Zacks Rank #2 (Buy).

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