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J.B. Hunt (JBHT) Segment Growth Aids, Interest Expense High
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J.B. Hunt Transport Services, Inc. (JBHT - Free Report) is benefiting from segmental growth and shareholder-friendly initiatives adopted by the company.
The strong performance of the Dedicated Contract Services (DCS) segment is driving J.B. Hunt’s top line. Revenues from the DCS segment rose 13% in first-quarter 2023 from the year-ago period to $879 million due to a 7% increase in average revenue producing trucks and a 5% increase in productivity (revenue per truck per week) versus the prior period. The same climbed 31% year over year in 2022 and 17.4% year over year in 2021 due to fleet productivity improvement and an increase in average revenue-producing trucks, among other factors.
We are also impressed by the company’s efforts to reward its shareholders through dividend payments and share repurchases. In January 2023, JBHT’s board of directors approved a dividend hike of 5%, thereby raising its quarterly cash dividend from 40 cents per share to 42 cents.
In the first quarter of 2023, JBHT paid $43.58 million in dividends. The move reflects JBHT’s intention to utilize free cash to enhance its shareholders’ returns. The company is also active on the buyback front, having resumed the same in the fourth quarter of 2020 after a temporary pause amid coronavirus concerns.
In the first quarter, J.B. Hunt repurchased 183,000 shares for $30.8 million. The trucking company had approximately $520 million remaining under its share repurchase authorization on Mar 31, 2023.
On the flip side, higher net interest expense is likely to mar J.B. Hunt’s bottom line. JBHT continues to incur higher interest expenses due to higher interest rates and debt issuance costs. During 2022, net interest expense increased 9.7% year over year. Net interest expense for the first quarter of 2023 increased 17.5% year over year due to higher effective interest rates.
J.B. Hunt’s weak cash position is worrisome. JBHT's cash and cash equivalents were $52.60 million at the end of the first quarter of 2023, much lower than the long-term debt of $991.71 million.
Zacks Rank & Stocks to Consider
J.B. Hunt currently carries a Zacks Rank #3 (Hold).
Copa Holdings is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA’s focus on its cargo segment is also impressive.
For second-quarter and full-year 2023, CPA’s earnings are expected to register 765.6% and 75.4% growth, respectively, on a year-over-year basis.
Allegiant also benefits from buoyant air-travel demand. With air-travel demand rising in the United States, operating revenues improved 8.5% year over year in 2022.
Management expects revenues to remain strong in 2023 as well. In first-quarter 2023, operating revenues increased 29.9% on a year-over-year basis. For second-quarter and full-year 2023, ALGT’s earnings are estimated to rise 364.5% and 192%, respectively, on a year-over-year basis.
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J.B. Hunt (JBHT) Segment Growth Aids, Interest Expense High
J.B. Hunt Transport Services, Inc. (JBHT - Free Report) is benefiting from segmental growth and shareholder-friendly initiatives adopted by the company.
The strong performance of the Dedicated Contract Services (DCS) segment is driving J.B. Hunt’s top line. Revenues from the DCS segment rose 13% in first-quarter 2023 from the year-ago period to $879 million due to a 7% increase in average revenue producing trucks and a 5% increase in productivity (revenue per truck per week) versus the prior period. The same climbed 31% year over year in 2022 and 17.4% year over year in 2021 due to fleet productivity improvement and an increase in average revenue-producing trucks, among other factors.
We are also impressed by the company’s efforts to reward its shareholders through dividend payments and share repurchases. In January 2023, JBHT’s board of directors approved a dividend hike of 5%, thereby raising its quarterly cash dividend from 40 cents per share to 42 cents.
In the first quarter of 2023, JBHT paid $43.58 million in dividends. The move reflects JBHT’s intention to utilize free cash to enhance its shareholders’ returns. The company is also active on the buyback front, having resumed the same in the fourth quarter of 2020 after a temporary pause amid coronavirus concerns.
In the first quarter, J.B. Hunt repurchased 183,000 shares for $30.8 million. The trucking company had approximately $520 million remaining under its share repurchase authorization on Mar 31, 2023.
On the flip side, higher net interest expense is likely to mar J.B. Hunt’s bottom line. JBHT continues to incur higher interest expenses due to higher interest rates and debt issuance costs. During 2022, net interest expense increased 9.7% year over year. Net interest expense for the first quarter of 2023 increased 17.5% year over year due to higher effective interest rates.
J.B. Hunt’s weak cash position is worrisome. JBHT's cash and cash equivalents were $52.60 million at the end of the first quarter of 2023, much lower than the long-term debt of $991.71 million.
Zacks Rank & Stocks to Consider
J.B. Hunt currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings, S.A. (CPA - Free Report) and Allegiant Travel Company (ALGT - Free Report) . Each of these companies presently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Copa Holdings is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA’s focus on its cargo segment is also impressive.
For second-quarter and full-year 2023, CPA’s earnings are expected to register 765.6% and 75.4% growth, respectively, on a year-over-year basis.
Allegiant also benefits from buoyant air-travel demand. With air-travel demand rising in the United States, operating revenues improved 8.5% year over year in 2022.
Management expects revenues to remain strong in 2023 as well. In first-quarter 2023, operating revenues increased 29.9% on a year-over-year basis. For second-quarter and full-year 2023, ALGT’s earnings are estimated to rise 364.5% and 192%, respectively, on a year-over-year basis.