J.B. Hunt Beats by a Penny - Analyst Blog

J.B. Hunt Transport Services (JBHT), the third-largest U.S. truckload carrier, reported its fourth quarter earnings of 46 cents per share beating the Zacks Consensus Estimate by a penny. Earnings per share rose 43.8% year over year from the year-ago earnings of 32 cents. The growth was driven by stronger Intermodal volumes.

In fiscal 2010, earnings improved to $1.56 per share from $1.05 in the prior year.

Total revenue increased 16.3% year over year to $1.02 billion in the fourth quarter, surpassing the Zacks Consensus Estimate of $954 million. The increment in revenues was aided by higher volumes in the Intermodal segment along with significant growth in Integrated Capacity Solutions and Dedicated Contract Services segments. Operating income leaped 33.5% year over year to $97.3 million attributable to strong profits across all segments.

For full fiscal 2010, total revenue and operating income rose 18.4% and 40.2% to $3.8 billion and 0.3 billion, respectively.

Segment Results

Intermodal reported revenue of $588 million, up 20% year over year, based on higher load count, increased pricing and higher fuel surcharges. Average tractor count increased to 2,665 from 2,312 in the year-ago quarter. Operating income climbed 30% year over year driven by higher volumes, modest price recovery and cost reduction efforts.

Dedicated Contract Services revenues grew 15% year over year to $237.9 million, primarily on 6% growth in revenue per truck per week (productivity). The average truck count in the reported quarter increased 5% to 4,573. Operating income rose 5% year over year, attributable to improvements in revenue and productivity.

Truck revenues inched up 0.1% year over year to $118 million despite a 10% reduction in tractors. At the end of the fourth quarter, tractor count decreased to 2,588 from 2,861 in the year-ago quarter. Overall, rates continued to improve with a 5.1% year over year growth registered in the quarter. Moreover, the average length of haul upped 3.7%. Operating profit of $4.4 million compared with a loss of $1.3 million in the year-ago quarter was recorded at the segment.

Integrated Capacity Solutions revenues climbed 24% year over year to $82.9 million attributable to a 6% increase in load volume and higher pricing in both contractual and transactional businesses. Operating profit shot up 89% to $3.3 million from $1.7 million in the year-ago quarter. On an annualized basis, the customer base and employee count rose 14% and 2%, respectively.

Liquidity

At the end of fiscal 2010, cash and cash equivalents of J.B. Hunt plunged to $7.65 million from $7.84 million at the end of 2009. Total debt increased to $654 million from $565 million at the end of the prior year.

Capital expenditure was $225.9 million in 2010 compared with $249.5 million in 2009.

Share Repurchase

J.B. Hunt repurchased 2 million shares at a total cost of $76 million in the reported quarter. The company has $249 million remaining in the share repurchase authorization.

Our Analysis

We believe J.B. Hunt continues to gain market share from its Intermodal and Dedicated businesses. Further, Integrated Capacity Solutions will continue to show rapid growth and Truck segment is expected to deliver significant leverage as pricing rebounds in the industry.

However, failure to pass on higher prices to customers and attract or retain drivers are the major risks, which limit the upside potential for the stock. In addition, the company faces intense competition with other truckload carriers such as YRC Worldwide Inc. (YRCW), Old Dominion Freight Line Inc. (ODFL) and Conway Inc. (CNW) due to low barriers to entry.

Consequently, we are maintaining our long-term Neutral rating on the stock supported by the Zacks #3 (Hold) Rank.

 
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