J.P Morgan Gives Color On J.B Hunt Transport Services Following Earnings

In J.P Morgan's view, the 4Q results show that J.B Hunt Transport Services JBHT intermodal and DCS revenue growth stories and JBHT's overall EPS growth remain on track. J.P Morgan continues to believe that cyclical pricing stories and secular drivers of volume growth in JBHT's intermodal and DCS businesses are likely to drive strong EPS growth for JBHT in 2011 and 2012 which should support further upside for the stock. JBHT's 4Q10 reported EPS of $0.46/share was above Consensus of $0.44 and our estimate of $0.45/share. While a lower than forecast tax rate provided a benefit of $0.02/share, greater than normal casualty and workers' compensation costs in DCS exerted a headwind of ~$0.02/share. J.P Morgan feels JBHT delivered strong performance in 4Q10 with 16% revenue growth and 44% EPS growth. J.P Morgan believes that JBHT is likely to face modest cost pressures in its intermodal business such as rising depreciation costs associated with new containers and chasis and increasing driver costs for drayage. While this modest inflation works against margin performance, JPM believes that volume growth and pricing gains will be more powerful factors which drive modest margin expansion with room for upside. J.P Morgan has an Overweight rating and $49 PT on JBHT