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J.B. Hunt Could Reach Record Levels of Success By Year End

Key Points

  • J.B. Hunt Transportation Services had a challenging quarter, but the outlook for recovery is positive.
  • Although business is down compared to last year, it is stabilizing well above 2019 levels.
  • The company is expected to continue generating capital returns as analysts drive the market.
  • 5 stocks we like better than J.B. Hunt Transport Services

Despite weak Q2 results, the shares of J.B. Hunt Transportation Services NASDAQ: JBHT have been rising and could potentially reach a new all-time high by the end of the year. The weak results can be attributed to market conditions returning to normal after the pandemic disruptions. However, the important takeaway from the report is that the company has grown since 2019 and is stabilizing at levels above that.

This positions the company for leverage when business begins to recover, which may happen soon. The likelihood of a recession in 2023 has greatly decreased, and the report indicates deflationary aspects for the economy. This may lead to increased economic activity in the second half of the year.

Regardless, J.B. Hunt is a high-quality business with strong capital returns and a positive long-term growth outlook.

J.B. Hunt Has Weak Quarter: Share Prices Increase

Although J.B. Hunt was anticipated to have a weak quarter, the Q2 results were even worse than expected. Revenue of $3.13 is down 18.5% compared to last year and missed the consensus by 485 basis points. The decline in volume in most segments, combined with a double-digit decline in revenue per load across all segments, contributed to the underperformance.

The good news is that revenue is up nearly 39% compared to 2019, and earnings gains are even higher. Intermodal, the largest revenue segment, decreased by 19% due to a 13% decline in revenue per load. The second largest segment, DCS, experienced a smaller decline of 2%. Integrated Capacity Solutions declined by 43%, Truckload by 16%, and Final Mile Services by 19%.

The margin was impacted by lower revenue per load, lower volume, higher costs, and increased interest expenses. Operating income fell by 23% compared to the top-line decrease of 18.5%, resulting in GAAP earnings of $1.81. This is a 25% decrease and 570 basis points worse than the MarketBeat consensus, although it can be attributed to the pre-pandemic comparison.

EPS is up 47% compared to 2019 and is expected to remain strong. This helps to support capital returns and a healthy balance sheet.

During the quarter, the company utilized its revolving credit facility to bolster its cash balance, but the overall balance sheet saw little change. Total liabilities increased, but long-term debt decreased, with the rise in cash reserves offsetting it. The important takeaway is that the dividend remains reliable, albeit at a small payout of 0.9% of share prices.

The dividend is further complemented by share repurchases totaling $53 million in the quarter. This represents approximately 0.25% of the pre-release market cap, with around $465 million or about 2.4% of the market cap remaining.

The Analysts Are Supporting JBHT Stock

Prior to the release of Q2 results, analysts’ sentiment was favorable, and it has remained unchanged following the release. Marketbeat.com received 4 revisions within the first 18 hours of the release, all recommending the purchase of the stock. The consensus rating is currently a Moderate Buy, which has remained steady over the past year.

The price target is lower compared to last year but is improving compared to the previous month and quarter due to upward revisions. Three out of the 4 new targets were raised, while the remaining target was adjusted to align with the consensus target.

Before considering J.B. Hunt Transport Services, it is worth mentioning…

MarketBeat tracks the top-rated and best performing research analysts on Wall Street, as well as the stocks they recommend to their clients. On a daily basis, MarketBeat identifies the five stocks that these top analysts are quietly advising their clients to buy before the broader market catches on. J.B. Hunt Transport Services did not make it onto that list.

While J.B. Hunt Transport Services currently has a “Moderate Buy” rating among analysts, these top-rated analysts believe that these five stocks are superior investment opportunities.

If the CEO, COO, and CFO of a company were all selling shares of their stock, would you want to know?

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