It has been about a month since the last earnings report for JB Hunt (JBHT - Free Report) . Shares have added about 3.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is JB Hunt due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Earnings Beat at J.B. Hunt in Q2
J.B. Hunt's 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.
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. 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.
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.
Liquidity & Buybacks
The 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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
At this time, JB Hunt has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, JB Hunt has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.