J.B. Hunt Transport To Benefit From Enhanced Rail Services Despite Brokerage And Truckload Challenges: Analyst

BMO Capital Markets analyst Fadi Chamoun reiterated the Market Perform rating on J.B. Hunt Transport Services, Inc. JBHT, raising the price target to $200 from $190.

J.B. Hunt Transport Services reported quarterly earnings of $1.80 per share, a 29.96% decrease over earnings of $2.57 per share from the same period last year.

While Q3/23 results fell below expectations, volumes in the core intermodal business inflected higher, with growth positioned to continue amid easing destocking, improved rail service, and shippers' increasing emphasis on cost savings, the analyst notes.

Chamoun is particularly encouraged by the company's growth, execution, and market position in Q3.

Demand momentum improved through the quarter and into October with network-wide gains as JBHT took market share from both IMCs and trucking, Chamoun writes.

According to the analyst, if the recession is absent, the combination of lapping destocking, strong rail service, and customer emphasis on cost savings should all drive sustained volume growth in the coming quarters.

While volume leads to price, the main risk continues to be excess capacity and the possibility that yields move another step down as demand and economic momentum remain muted, Chamoun mentions.

On the negative side, the analyst expects Brokerage and Truckload to remain under pressure into 2024, given ongoing market challenges. 

Final Mile revenue quality is improving; however, growth may only be achieved once economic momentum returns, per the analyst.

Increased pricing has begun to offset network congestion and higher cost pressures. 

However, as intermodal fluidity improves, Chamoun expects strong volume growth amid truck-to-rail conversion.

In the medium-to-long term, JBHT and the broader intermodal market face limited growth opportunities except on only the shortest of lanes where trucking has a clear competitive advantage, the analyst adds.

Price Action: JBHT shares are trading lower by 6.89% to $182.51 on the last check Wednesday.