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J.B. Hunt (JBHT) Gains on Q2 Earnings Beat, Revenues Up Y/Y

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J.B. Hunt Transport ServicesJBHT second-quarter 2019 earnings (excluding 14 cents from non-recurring items) of $1.37 per share outpaced the Zacks Consensus Estimate by 2 cents. Moreover, total operating revenues came in at $2,261.6 million, which increased 5.7% year over year on the back of a strong performance by the Dedicated Contract Services (DCS) segment.

Despite a challenging freight environment, this bottom-line outperformance and top-line growth pleased investors. As a result, the stock gained 7.9% in after-market trading on Jul 15.

However, quarterly revenues fell short of the Zacks Consensus Estimate of $2,275.9 million. Moreover, earnings were flat on a year-over-year basis.

Bleak Cost Picture

Quarterly operating income (on a reported basis) decreased 10% to $193.1 million primarily due to higher costs. Furthermore, increased costs related to insurance and claims apart from those associated with rail purchase transportation resulted in higher expenses.

Also, operating ratio (operating expenses as a percentage of revenues) deteriorated to 91.5% from 90% in the prior-year quarter due to a 7.5% year over year rise in operating expenses. Notably, effective tax rate decreased to 25% from 26% recorded in the second quarter of 2018.

Segmental Performance

The Intermodal (JBI) division generated quarterly revenues of $1.15 billion, down 1% year over year. Moreover, load volumes in the segment fell 8%. Revenue per load, excluding fuel surcharge revenues, climbed 8% on a year-over-year basis. On a year-over-year basis, operating income declined 7% due to increased rail purchased transportation costs and driver wages among other factors.

Revenues at DCS rose 28% year over year to $680 million, courtesy of an 8% increase in truck productivity. Excluding fuel surcharges, productivity increased roughly 9% a year ago driven by factors like higher customer rates that were above 98%. Operating income improved 3% year over year to $60.5 million owing to the addition of new trucks and a $4.3 million decrease in salaries and wages accruals.

Integrated Capacity Solutions (ICS) revenues declined 4% year over year to $334 million, with volumes declining 7%. Revenue per load, however, increased 4% year over year due to favorable customer freight mix. In the second quarter, ICS incurred an operating loss of $0.6 million compared to an operating income of $14.9 million reported in the year-ago quarter. This dismal performance can be attributed to lower gross margin apart from higher personnel and technology costs.

Truck (JBT) revenues decreased 2% year over year to $99.6 million. At the end of the second quarter, total tractors were 1,879 (out of which 946 were company owned) compared with 1,976 in the year-ago quarter. Trailers fell to 6,829 in the period compared with 6,928 a year ago. Nonetheless, operating income increased 19% to $8.9 million, courtesy of favorable factors like lower equipment ownership costs apart from reduced non-driver personnel expenses.

J.B. Hunt Transport Services, Inc. Price, Consensus and EPS Surprise


J.B. Hunt Transport Services, Inc. Price, Consensus and EPS Surprise

J.B. Hunt Transport Services, Inc. price-consensus-eps-surprise-chart | J.B. Hunt Transport Services, Inc. Quote

Liquidity & Buybacks

This Zacks Rank #5 (Strong Sell) company exited the second quarter with cash and cash equivalents of $6.9 million compared with $7.6 million at the end of 2018. Long-term debt was $1.4 billion compared with $898.4 million at 2018 end. Net capital expenditures in the first half of 2019 totaled $475 million compared with $354 million in the prior-year comparable period.

During the reported quarter, J.B. Hunt bought approximately 1.98 million shares of its common stock for roughly $190 million. The company has approximately $181 million remaining under its share repurchase authorization at the end of the second quarter. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Investors interested in the Zacks Transportation sector are keenly awaiting second-quarter 2019 earnings reports from key players like Union Pacific Corporation UNP, United Parcel Service UPS and Southwest Airlines (LUV - Free Report) .

While Union Pacific is scheduled to announce second-quarter results on Jul 18, UPS and Southwest Airlines will release the same on Jul 24 and Jul 25, respectively.

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