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J.B. Hunt Transport Services Inc. (JBHT - Analyst Report), one of the largest U.S. truckload carriers, reported first-quarter 2014 earnings of 58 cents per share, missing the Zacks Consensus Estimate of 63 cents. The figure also declined 4.9% from 61 cents earned in the year-ago quarter.

Total revenue increased 9.3% year over year to $1,407 million but fell marginally short of the Zacks Consensus Estimate of $1,409 million.

Operating income for the quarter declined 6.2% year over year to $117.31 million.

Segment Results

Intermodal reported quarterly revenues of $835.5 million, up 4.9% year over year. Volume growth in Eastern and Transcontinental network aided revenue growth. However, rail service disruptions and winter storms impacted the Midwest and Northeast network volume growth over several weeks of the quarter. The average tractor count increased to 4,250 from 3,665 in the year-ago quarter. Operating income fell 3.7% year over year to $93.2 million.

Dedicated Contract Services revenues grew 15.4% year over year to $322.05 million in the first quarter on higher number of revenue-generating trucks from new accounts. The average truck count stood at 6,491 against 5,322 in the year-ago quarter. Operating income plunged 28.9% year over year to $15.6 million. Higher equipment and maintenance costs, lower productivity and severe weather conditions affected the operating performance of the sector.

Integrated Capacity Solutions revenues grew 33.0% year over year to $162.6 million, attributable to a 3% increase in load volume and 29% growth in revenue per load. Operating income increased 18.4% year over year to $6.1 million owing to higher revenues. On a year-over-year basis, the carrier base rose 7% and employee count grew 13%.

Truck revenues dropped 9.2% year over year to $92.5 million due to a 9% decline in fleet size, and decreased utilization per truck due to a harsh winter spanning January and February. The average tractor count reduced to 1,892 from 2,083 in the year-ago quarter. Rates from shippers registered a year-over-year improvement of 1%. The average length of haul decreased 9.1%.

The company reported an operating profit of 2.45 million as against $1.1 million in the year-ago quarter. The improvement can be attributed to increased rate per loaded mile, a reduced trailer fleet, lower personal costs, and profits from equipment sales. These tailwinds were offset by increased driver hiring costs, higher driver and independent contractor costs per mile, increased per unit maintenance and equipment costs along with decreased productivity in January and February.

Liquidity

At the end of the reported quarter, cash and cash equivalents increased to $124.2 million from $5.8 million at end-2013. Long-term debt stood at $752.2 million as against $458.0 million at the end of 2013.

Capital expenditure in first-quarter 2014 was $158 million against $115 million at the end of first-quarter 2013.

Share Repurchase

As of Mar 31, 2014, the company had approximately $338 million worth of shares remaining under its repurchase authorization.

Our Analysis

We remain encouraged by the enhanced equipment velocity, accelerated fleet conversion and expansion of branches. We also appreciate the company’s efforts to expand its brand to unexplored territories. However, a competitive scenario, higher staff costs and a deteriorating truck business limit its upside potential.  

J.B. Hunt currently carries a Zacks Rank #3 (Hold). However, better-ranked stocks worth considering within the same sector are Roadrunner Transportation Systems Inc. (RRTS - Snapshot Report), YRC Worldwide Inc. (YRCW - Snapshot Report) and American Railcar Industries Inc. (ARII - Snapshot Report), all with a Zacks Rank #2 (Buy).

Read the Full Research Report on YRCW
Read the Full Research Report on JBHT
Read the Full Research Report on ARII
Read the Full Research Report on RRTS


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