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J.B. Hunt Stock Down 13% in Yesterday's Trading: Here's Why
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Key Takeaways
J.B. Hunt's shares fell as management warned rising operating costs could pressure third-quarter earnings.
Driver-related expenses are expected to rise about $25 million sequentially as demand and peak season build.
Fuel, accident claims and medical costs may squeeze margins despite strong intermodal and dedicated demand.
J.B. Hunt Transport Services’ (JBHT - Free Report) shares declined on Sept. 16 after management warned that rising operating costs could pressure third-quarter earnings despite strong freight demand.
At the Morgan Stanley Laguna Conference, CFO Brad Delco projected that earnings could fall 5-10% sequentially from the second quarter to the third quarter. The cautious outlook also weighed on other truck operators like Old Dominion Freight Line (ODFL - Free Report) and ArcBest Corporation (ARCB - Free Report) by raising concerns about industrywide cost inflation. While shares of Old Dominion Freight Line declined 3.64% on Sept. 16 from Sept. 15’s closing price, ArcBest’s shares fell 3.6%.
J.B. Hunt expects driver-related expenses to increase approximately $25 million sequentially. These costs include recruitment, advertising, onboarding, training, higher compensation and sign-on, retention and safety bonuses. The company is increasing spending to secure enough drivers to support growing demand and prepare for peak-season activity.
Fuel represents another major near-term headwind. Sharp increases in diesel prices are expected to create at least a $10 million sequential impact in the third quarter. Although fuel-surcharge programs generally recover higher expenses, a timing lag between fuel purchases and surcharge collections can temporarily squeeze margins. Higher accident claims and group medical costs are adding further pressure.
The warning overshadowed encouraging demand trends. J.B. Hunt continues to experience strong intermodal activity, market-share gains and a record pipeline in its Dedicated Contract Services business. However, intermodal pricing typically adjusts more slowly than truckload costs, creating a near-term mismatch between revenues and expenses.
Therefore, the stock’s decline of 13.3% on Sept. 16 from Sept. 15's closing level reflected concerns that escalating driver, fuel and claims costs would outweigh volume growth in the third quarter, delaying the company’s margin recovery.
JBHT’s Zacks Rank
J.B. Hunt currently carries a Zacks Rank #3 (Hold).
View the Zacks #1 Rank List
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J.B. Hunt Stock Down 13% in Yesterday's Trading: Here's Why
Key Takeaways
J.B. Hunt Transport Services’ (JBHT - Free Report) shares declined on Sept. 16 after management warned that rising operating costs could pressure third-quarter earnings despite strong freight demand.
At the Morgan Stanley Laguna Conference, CFO Brad Delco projected that earnings could fall 5-10% sequentially from the second quarter to the third quarter. The cautious outlook also weighed on other truck operators like Old Dominion Freight Line (ODFL - Free Report) and ArcBest Corporation (ARCB - Free Report) by raising concerns about industrywide cost inflation. While shares of Old Dominion Freight Line declined 3.64% on Sept. 16 from Sept. 15’s closing price, ArcBest’s shares fell 3.6%.
J.B. Hunt expects driver-related expenses to increase approximately $25 million sequentially. These costs include recruitment, advertising, onboarding, training, higher compensation and sign-on, retention and safety bonuses. The company is increasing spending to secure enough drivers to support growing demand and prepare for peak-season activity.
Fuel represents another major near-term headwind. Sharp increases in diesel prices are expected to create at least a $10 million sequential impact in the third quarter. Although fuel-surcharge programs generally recover higher expenses, a timing lag between fuel purchases and surcharge collections can temporarily squeeze margins. Higher accident claims and group medical costs are adding further pressure.
The warning overshadowed encouraging demand trends. J.B. Hunt continues to experience strong intermodal activity, market-share gains and a record pipeline in its Dedicated Contract Services business. However, intermodal pricing typically adjusts more slowly than truckload costs, creating a near-term mismatch between revenues and expenses.
Therefore, the stock’s decline of 13.3% on Sept. 16 from Sept. 15's closing level reflected concerns that escalating driver, fuel and claims costs would outweigh volume growth in the third quarter, delaying the company’s margin recovery.
JBHT’s Zacks Rank
J.B. Hunt currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.