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J.B. Hunt (JBHT) Q1 Earnings Miss, Stock Up on Revenue Beat

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J.B. Hunt Transport ServicesJBHT first-quarter 2020 earnings of 98 cents per share missed the Zacks Consensus Estimate of $1.04. The bottom line also declined 10.1% year over year. However, total operating revenues of $2,280.8 million surpassed the Zacks Consensus Estimate of $2,215.9 million and also increased 9% year over year, benefiting from impressive performances across all the segments.

The revenue beat perhaps boosted investor confidence in the stock. Consequently, shares of the company gained 4.2% in after-hours trading on Apr 14.

Quarterly operating income (on a reported basis) declined 8% to $155 million. The figure reflects $12.3-million charge related to a one-time bonus given to employees in appreciation of their efforts during the coronavirus crisis. Increased rail purchase transportation rates, higher driver wages and investments in technology also weighed on operating income. With operating expenses rising 10.6% year over year, operating ratio (operating expenses as a percentage of revenues) deteriorated to 93.2% from 92% in the prior-year quarter. Notably, effective tax rate increased to26.5% from 22.7% recorded in the first quarter of 2019.

Segmental Performance

The Intermodal (JBI) division generated quarterly revenues of $1.15 billion, up 6% year over year. Overall volumes in the segment were up 7% year over year.The company started witnessing volume softness due to COVID-19 since March. Meanwhile, revenue per load excluding fuel surcharge revenues increased slightly year over year. However, operating income dipped 1% to $102 million.

Revenues at the Dedicated Contract Services (DCS) segment rose 10% year over year to $542 million, courtesy of 2% expansion in truck productivity. Excluding fuel surcharges, productivity rose roughly 3% owing to higher customer rates and other factors. Further, operating income surged 46% year over year to $73 million owing to ramped-up productivity from fleet and reduced costs.

Integrated Capacity Solutions (ICS) revenues ascended 12% year over year to $335 million with volumes expanding 2%. However, revenue per load decreased 10%.

Truck (JBT) revenues inched up 3% to $105 million, primarily owing to 15% increase in load count.  At the end of the first quarter, total tractors were 1,887 (of which 807 were company owned) compared with 2,043 in the year-ago quarter. Meanwhile, operating income dropped 75% to $2 million due to escalated costs pertaining to purchased transportation and others as well as unfavorable rates.

From the first quarter onward, the company started reporting Final Mile Services (FMS) revenues under a separate segment, previously included under the DCS division. FMS revenues jumped 39% to $154 million, primarily owing to Cory 1st Choice Home Delivery and RDI Last Mile acquisitions. However, the buyouts induced a 17% fall in productivity (revenue per stop). Additionally, the segment reported operating loss of $3.3 million against an operating income of $0.2 million in the first quarter of 2019. The downside was due to temporary suspension of operations as a result of the coronavirus pandemic and higher costs arising from investments in expanding the FMS network among other factors.

Liquidity & Buybacks

The Zacks Rank #4 (Sell) company exited the first quarter with cash and cash equivalents of $48.45 million compared with $35 million at the end of 2019. Long-term debt was $1.3 billion compared with $1.29 billion at 2019 end. Net capital expenditures in the first quarter totaled $129 million compared with $212 million in the first quarter of 2019.

During the reported quarter, J.B. Hunt bought back approximately 798,000 shares for roughly $75 million. The company has approximately $520 million remaining under its share repurchase authorization at the end of the first quarter.

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

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting first-quarter 2020 earnings reports from key players like Kansas City Southern KSU, Landstar System, Inc. LSTR and CSX Corporation CSX. While Kansas City Southern will release earnings numbers on Apr 17, Landstar and CSX will announce results on Apr 22.

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