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Will High Costs Weigh on J.B. Hunt's (JBHT) Q1 Earnings?

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J.B. Hunt Transport Services, Inc. (JBHT - Free Report) is scheduled to release first-quarter 2018 results on Apr 16.

Last quarter, the company delivered a positive earnings surprise of 0.97%. It posted better-than-expected earnings and revenues in the fourth quarter of 2017. Moreover, both the top and bottom line improved substantially year over year.

However, things do not look up for the company in the to-be-reported quarter. Moreover, shares of the company have underperformed the industry in the January-March period. While the stock has gained 1.9%, the industry has increased 2.9%.



 

Factors at Play

J.B. Hunt has been struggling with shortage of drivers for quite some time. The company’s bottom line in the first quarter is likely to be hurt by higher operating expenses due to increased driver wages among other factors.

The company is highly leveraged, which further adds to its woes. This is evident from the current ratio of its long-term debt-to-equity (expressed as a percentage) of 59. The figure compares unfavorably with its industry’s average of 15.5.

However, the new tax law is a big boon to the company. Huge savings from the reduced tax rate are anticipated to boost cash flow, which in turn should aid the bottom line.

Expanded volume at the company’s primary division of intermodal is expected to aid results in the quarter to be reported.

The company’s efforts to reward shareholders through dividend payments and share repurchases are also impressive. In January, J.B. Hunt raised its quarterly dividend to 24 cents per share, representing an increase of 4.3% over the previous payout.

Earnings Whispers

Our proven model does not conclusively show that J.B. Hunt is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as elaborated below.

Zacks ESP: J.B. Hunt has an Earnings ESP of -0.23%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: J.B. Hunt has a Zacks Rank #3, which increases the predictive power of ESP. However, a company needs positive ESP as well to be confident about an earnings beat. Hence, this combination leaves our surprise prediction inconclusive.

We caution against all Sell-rated stocks (4 or 5) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.


Stocks to Consider

Investors interested in the broader Transportation sector may consider American Airlines Group Inc. (AAL - Free Report) , Allegiant Travel Company (ALGT - Free Report) and JetBlue Airways Corporation (JBLU - Free Report) as these stocks possess the right combination of elements to deliver an earnings beat this time around.

American Airlines has an Earnings ESP of +17.00% and a Zacks Rank of 3. The company is expected to report first-quarter results on Apr 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

Allegiant Travel has an Earnings ESP of +1.11% and is a Zacks #3 Ranked player. The company is scheduled to announce first-quarter earnings on Apr 25.

JetBlue is also a #3 Ranked player and has an Earnings ESP of +1.73%. The company is slated to release first-quarter numbers on Apr 24.

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