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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.
  • Business is down compared to last year but stabilizing well above the 2019 levels.
  • Capital returns will continue while analysts drive the market.
  • 5 stocks we like better than J.B. Hunt Transport Services

Despite weak Q2 results, shares of J.B. Hunt Transportation Services (NASDAQ: JBHT) are on the rise and could reach a new all-time high by the end of the year. The weak results are due to market conditions that have corrected from pandemic-induced levels, but the key takeaway is that the company has grown since 2019 and business is stabilizing well above those levels.

This positions the company for leverage when business begins to pick up, which could be soon. There is a reduced likelihood of a recession in 2023, and the report’s details suggest deflationary effects on the economy, which may lead to increased economic activity in the second half of the year.

Regardless, J.B. Hunt is a high-quality business with healthy capital returns and long-term growth potential.

J.B. Hunt Has Weak Quarter: Shares Move Higher

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

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

Lower revenue per load, lower volume, higher costs, and increased interest expenses impacted the margin. Operating income fell by 23% compared to the top-line’s 18.5% decrease, resulting in GAAP earnings of $1.81. This is a 25% decline and 570 basis points worse than the consensus, but it’s partly offset by the pre-pandemic comparison.

EPS is up 47% compared to 2019 and is expected to remain solid, supporting capital returns and a healthy balance sheet.

The company utilized its revolving credit facility to strengthen its cash balance during the quarter, with little change to the balance sheet. Total liabilities increased, but long-term debt decreased, and the increase in cash reserves balanced it out. The key takeaway is that the dividend remains reliable, although it is a small payout at 0.9% of share prices.

The dividend is complemented by share repurchases totaling $53 million in the quarter, which is about 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

The trend in analysts’ sentiment was favorable ahead of the Q2 release, and it has remained unchanged afterward. Four revisions were made within the first 18 hours of the release, and all of them recommended buying the stock. The consensus rating is a Moderate Buy, which has been consistent over the past year.

The price target has decreased compared to last year but has improved compared to last month and last quarter due to upward revisions. Three of the four new targets were revised higher, and the remaining one was adjusted to align with the consensus target.

Before considering J.B. Hunt Transport Services, take note of this.

MarketBeat keeps track of Wall Street’s top-rated and best-performing research analysts, along with the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that the top analysts are quietly whispering to their clients to buy now before the broader market catches on… and J.B. Hunt Transport Services wasn’t on the 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 better buys.

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