J.B. Hunt (JBHT) Shares Down On Q1 Earnings & Revenue Miss

J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) performed disappointingly in the first quarter of 2019 with lower-than-expected earnings and revenues. This downside was primarily due to high costs. Following the company’s dismal performance, the stock shed 4.7% of value in after-hours trading on Apr 15.

The company’s earnings of $1.09 per share fell short of the Zacks Consensus Estimate of $1.25. However, the bottom line inched up 1.9% year over year.

Total operating revenues of $2.09 billion lagged the Zacks Consensus Estimate of $2.2 billion. However, the top line improved 7.3% year over year on a strong segmental performance.

Additionally, operating income (on a reported basis) dipped 1% to $168 million due to costs associated with rail purchase transportation. Also, operating ratio (operating expenses as a percentage of revenues) deteriorated to 92% from 91.3% in the prior-year quarter due to 8% rise in operating expenses from the year-ago quarter’s tally. Notably, effective tax rate decreased to 22.7% compared with 26% in the first quarter of 2018. For 2019, the same is expected to be 24%.

Segmental Performance

The Intermodal (JBI) division generated quarterly revenues of $1.09 billion, up 2% year over year. However, load volumes in the segment fell 7%. Revenue per load excluding fuel surcharge revenues climbed 11% on a year-over-year basis. Operating income declined 10% year over year due to increased rail purchased transportation costs and driver wages among other factors.

Dedicated Contract Services (DCS) revenues rose 22% year over year to $602 million. The company added 440 trucks to its fleet during the first quarter while customer retention rates were above 98%. Operating income increased 24% year over year to $50 million owing to the addition of new trucks and increased productivity.

Integrated Capacity Solutions (ICS) revenues were up 2% year over year to $301 million. Revenue per load declined 12% year over year due to customer mix changes and reduced spot market activity compared with the year-ago quarter’s level. Meanwhile, volumes expanded 15% year over year. The segment delivered an operating income of $7 million, down 22% year over year due to higher personnel and technology costs.

Truck (JBT) revenues improved 10% year over year to $102 million. At the end of the first quarter, J.B. Hunt operated 2,043 tractors compared with 1,926 in the year-ago quarter. Trailers fell to 6,785 in the period compared with 7,036 a year ago. Operating income soared 41% to $7 million, courtesy of favorable factors like higher rates per loaded mile and lower equipment ownership costs.

Liquidity

This Zacks Rank #3 (Hold) company exited the first quarter with cash and cash equivalents of $52.36 million compared with $7.6 million at the end of 2018. Long-term debt was $1.28 billion compared with $898.4 million at 2018 end. Net capital expenditures in the quarter under review totaled $212.15 million compared with $179.05 million in the prior-year period. 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 2019 earnings reports from key players like Union Pacific Corporation (NYSE:UNP) , Landstar System, Inc. (NASDAQ:LSTR) and United Parcel Service, Inc. (NYSE:UPS) . While Union Pacific is scheduled to announce first-quarter earnings on Apr 18, Landstar and UPS will release the same on Apr 24 and Apr 25, respectively.

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