A month has gone by since the last earnings report for JB Hunt (JBHT). Shares have lost about 8.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is JB Hunt due for a breakout? 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 Miss at J.B. Hunt in Q4
J.B. Hunt Transport Services’ fourth-quarter 2019 earnings of $1.35 per share missed the Zacks Consensus Estimate of $1.52. Total operating revenues of $2,450.3 million also lagged the Zacks Consensus Estimate of $2,454.2 million. The top line, however, improved 5.7% year over year, benefiting from impressive performance of the Dedicated Contract Services (DCS) and Integrated Capacity Solutions (ICS) segments.
Quarterly operating income (on a reported basis) rose 67% to $205.1 million. Also, operating ratio (operating expenses as a percentage of revenues) improved to 91.6% from 94.7% in the prior-year quarter despite operating expenses rising 2.3% year over year. Notably, effective tax rate increased to 24.8% from 20.5% recorded in the fourth quarter of 2018.
The Intermodal (JBI) division generated quarterly revenues of $1.27 billion, flat year over year. However, overall volumes in the segment were up 2% year over year. Meanwhile, revenue per load excluding fuel surcharge revenues was flat on a year-over-year basis. However, operating income skyrocketed 304% year over year.
Revenues at the DCS segment rose 20% year over year to $717 million, courtesy of 9% expansion in truck productivity. Excluding fuel surcharges, productivity jumped roughly 11% owing to the Cory 1st Choice Home Delivery acquisition and higher customer rates among other factors. Further, operating income surged 34% year over year to $79.6 million on addition of trucks and ramped-up productivity.
ICS revenues ascended 9% year over year to $377 million with volumes expanding 3%. Revenue per load also climbed 5.5% on the back of changes in customer mix.
Truck (JBT) revenues plunged 20% year over year to $94 million due to lower loads and soft truck pricing. At the end of the fourth quarter, total tractors were 1,831 (of which 845 were company-owned) compared with 2,112 in the year-ago quarter. Trailers increased to 6,975 in the period compared with 6,800 a year ago. Meanwhile, operating income dropped 57% to $6.3 million due to decreased truck loads.
Liquidity & Buybacks
The company exited the fourth quarter with cash and cash equivalents of $35 million compared with $7.6 million at the end of 2018. Long-term debt was $1.3 billion compared with $898.4 million at 2018 end. Net capital expenditures in 2019 totaled $688 million compared with $885 million in 2018.
During the reported quarter, J.B. Hunt bought approximately 441,000 shares of its common stock for roughly $50 million. The company has approximately $95 million remaining under its share repurchase authorization at the end of the fourth quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -8.98% due to these changes.
At this time, JB Hunt has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 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 indicates a downward shift. It's no surprise JB Hunt has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.