J.B. Hunt (JBHT) Stock Up 6% On Q4 Earnings & Revenue Beat

J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) performed impressively in the fourth quarter of 2018, delivering better-than-expected earnings per share and revenues.

The earnings and revenues beat boosted investors’ optimism. As a result, shares of the company appreciated 5.7% in after-hours trading on Jan 17.

The transportation company’s earnings (excluding 96 cents from non-recurring items) of $1.77 per share outpaced the Zacks Consensus Estimate of $1.48. However, increased costs associated with the ongoing arbitration with BNSF Railway Company hurt the bottom line.

Total operating revenues increased 16.5% year over year to $2,317.84 million and beat the Zacks Consensus Estimate of $2,297.8 million. The upside can be attributed to strong segmental performance.

Additionally, operating income decreased 15.8% to $122.74 million (on a reported basis) due to costs associated with rail purchase transportation. Also, operating ratio (operating expenses as a percentage of revenues) deteriorated to 94.7% from 92.7% in the prior-year quarter due to 19% rise in operating expenses from the year-ago quarter’s tally. Notably, effective tax rate increased to 20.5% sequentially in the quarter under discussion from 20.4% in the third quarter of 2018.

Segmental Performance

The Intermodal (JBI) division reported quarterly revenues of $1.26 billion, up 15% year over year. However, load volumes in the segment dipped 1%. Revenue per load excluding fuel surcharge revenues climbed 15% on a year-over-year basis. Operating income plunged 65% year over year, due to increased costs stemming from service delays and congestion.

Dedicated Contract Services (DCS) revenues rallied 25% year over year to $596 million. The company added 458 trucks to the fleet during the fourth quarter, while customer retention rates were above 98%. Operating income surged 70% year over year to $59.4 million due to addition of new trucks and increased productivity.

Integrated Capacity Solutions (ICS) revenues increased 7% year over year to $345 million. Revenue per load declined 6.4% year over year due to customer mix changes and reduced spot market activity compared with the year-ago quarter’s level. Meanwhile, volumes improved 14% year over year. The segment delivered an operating income of $16.1 million, up 43% year over year owing to higher gross profit margin.

Truck (JBT) revenues improved 21% year over year to $118 million. At the end of the fourth quarter, J.B. Hunt operated 2,112 tractors compared with 2,032 in the year-ago quarter. Trailers fell to 6,800 in the period compared with 7,120 a year ago. Operating income soared 131% to $14.7 million, courtesy of favorable factors like higher rates per loaded mile and lower equipment ownership costs.

Liquidity

This Zacks Rank #3 (Hold) company exited 2018 with cash and cash equivalents of $7.6 million compared with $14.61 million at the end of 2017. Long-term debt was $898.4 million compared with $1.09 billion at 2017-end. Net capital expenditures for 2018 totaled $885 million compared with $511 million in 2017.

Share Repurchases

In the quarter under review, J.B. Hunt repurchased 494,000 shares for approximately $50 million. As of Dec 31, 2018, the company had around $371 million remaining under its buyback program. You can see the complete list of today’s Zacks #1 Rank stocks here.

2019 Outlook

Capex for 2019 is estimated to be around $200 million less than the 2018 level. J.B. Hunt expects to allocate a major portion of Capex spending toward DCS and JBI segments and spend around $50 million for technological improvement in digital platforms.

Upcoming Releases

Investors interested in the broader Transportation Sector are keenly awaiting fourth-quarter 2018 earnings reports from key players like American Airlines Group Inc. (NASDAQ:AAL) , C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) and Allegiant Travel Company (NASDAQ:ALGT) . While American Airlines is scheduled to report fourth-quarter earnings on Jan 24, C.H. Robinson and Allegiant will release the same on Jan 29 and Jan 30, respectively.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>