It has been about a month since the last earnings report for JB Hunt (NASDAQ:JBHT). Shares have added about 0.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is JB Hunt due for a pullback? 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 Q3
J.B. Hunt's third-quarter 2019 earnings of $1.4 per share missed the Zacks Consensus Estimate of $1.44. However, total operating revenues of $2,363.7 million surpassed the Zacks Consensus Estimate of $2,348.2 million and also increased 7% year over year. The top line benefited from the strong performance of the Dedicated Contract Services (DCS) segment.
Quarterly operating income (on a reported basis) rose 21% to $212.1 million. Also, operating ratio (operating expenses as a percentage of revenues) improved to 91% from 92.1% in the prior-year quarter despite operating expenses rising 5.7% year over year. Notably, effective tax rate increased to 24.3% from 20.4% recorded in the third quarter of 2018.
Segmental Performance
The Intermodal (JBI) division generated quarterly revenues of $1.24 billion, up 2% year over year. However, overall volumes in the segment were flat year over year. Meanwhile, revenue per load excluding fuel surcharge revenues climbed 5% on a year-over-year basis. Also, operating income increased 10% year over year.
Revenues at DCS rose 28% year over year to $696 million, courtesy of a 9% increase in truck productivity. Excluding fuel surcharges, productivity increased roughly 11% owing to the Cory 1st Choice Home Delivery acquisition and higher customer rates among other factors. Further, operating income soared more than 100% year over year to $78.3 million owing to the addition of trucks and ramped up productivity.
Integrated Capacity Solutions (ICS) revenues dipped 3% year over year to $337 million with volumes contracting 4%. Revenue per load, however, inched up 2% year over year owing to competitive pricing among other factors.
Truck (JBT) revenues declined 11% year over year to $94 million. At the end of the third quarter, total tractors were 1,896 (of which 859 were company-owned) compared with 1,972 in the year-ago quarter. Trailers increased to 6826 in the period compared with 6818 a year ago.
Meanwhile, operating income dropped 28% to $6.6 million due to decreased truck loads.
Liquidity & Buybacks
The company exited the third quarter with cash and cash equivalents of $75 million compared with $7.6 million at the end of 2018. Long-term debt was $1.29 billion compared with $898.4 million at 2018 end. Net capital expenditures in the first nine months of 2019 totaled $586.61 million compared with $584.98 million in the prior-year period.
During the reported quarter, J.B. Hunt bought approximately 380,000 shares of its common stock for roughly $36 million. The company has approximately $145 million remaining under its share repurchase authorization at the end of the third quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, JB Hunt has a great Growth Score of A, 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 top 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.
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.
J.B. Hunt Transport Services, Inc. (JBHT): Free Stock Analysis Report
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