J.B. Hunt Transportation Services Fires On All Cylinders

A Bottom Is In For J.B. Hunt Transportation Services 

Supply chain challenges or not, J.B. Hunt Transportation Services NASDAQ: JBHT is firing on all cylinders. The Q1 results reveal the company is supported by three pillars of trucking including volume, rates, and fuel surcharges. The key takeaway from the report is that both revenue and earnings are better than expected and we expect the company to continue performing at this level (assuming of course the FOMC doesn’t spark a recession) as it leverages organic and acquisitional growth opportunities. The risk lay in staffing, the need for drivers remains unchanged, but the company is slowly building its workforce. 

“While overall labor and other supply chain issues have continued, we leveraged experience, focus, and technology to move through this period with success … Our equipment utilization continues to underperform due to consistent challenges with philosophy and the persistent need for new driver hires … We added 1,889 net drivers during 2021 and have so far increased our driver force by just over 1,400 this year. Our hiring teams are built out to levels not seen before in our history,” said CEO John Roberts during the conference call. 

J.B. Hunt Outperforms Expectations In Q1 2022

J.B. Hunt put in a solid performance despite the need for drivers. The company reported $3.49 billion in consolidated revenue for a gain of 33.2% over last year. The revenue was driven by strong performance in all segments and outperformed the Marketbeat.com consensus estimate by $0.170 billion or 510 basis points. Ex-fuel, because fuel surcharges are back in the picture, revenue grew by a still strong 27% and is bolstered by a recent acquisition. 

On a segment basis, Truckload revenue grew fastest at 77% followed by a 36% increase in Intermodal revenue. Intermodal revenue is driven by a 28% increase in revenue per load coupled with a 7% increase in volume. Integrated Capacity Solutions and Dedicated Contract Services grew at a 29% and 28% clip with DDS driven by a 20% increase in average trucks and a 6% increase in productivity. The weakest segment was Final Mile and it still grew at an 8% pace. FMS revenue was offset by supply challenges that we see easing based on the strength in Truckload, ICS, Intermodal, and DDS. 

Moving down to the earnings, it was the margins that really impressed us. The company grew its operating margin by 61% over last year to drive a 67% increase in GAAP earnings. The GAAP earnings of $2.29 are up from last year’s $1.37 and beat the Marketbeat.com consensus by $0.34. The best news is the company also used $75 million in cash flow to buy back 382,000 shares and left its debt level unchanged on a YOY basis. 

The Analysts Like What J.B. Hunt Is Hauling 

There have been at least 5 sell-side commentaries out since the JBHT Q1 report was released and the news is bullish. While 2 of the 5 lowered their price targets their average price is higher than the average price of the 3 analysts that raised their targets and is in line with the broader consensus. The Markbeat.com consensus has the stock trading around $212 for a gain of 24%. On a technical basis, the stock is set up for a rebound, the question is how high? Premarket action has it up about 2.0% and trading near the $175 level. If the market follows through on this move we see a retest of the $190 region which will be the next big hurdle for price action.