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JB Hunt (JBHT) Down 2.8% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for JB Hunt (JBHT - Free Report) . Shares have lost about 2.8% 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 drivers.

Earnings Miss at J.B. Hunt in Q1

J.B. Hunt's 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.

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 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.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -29.84% due to these changes.

VGM Scores

Currently, JB Hunt has a nice Growth Score of B, 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 second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, JB Hunt has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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