J.B. Hunt's Core Intermodal Business Still Navigating Intense Trucking Sector Competition

Senior Equity Analyst

Matthew Young

Revenue segments as reported by the company.

Operating revenues, excluding fuel surcharge revenues

Fuel surcharge revenues

Revenue Segments

Gross Profit, Operating Income, and Net Income as a percentage of Revenue

Operating Margin

Profit Margin

Margins

An operating expense is an expense a business incurs through its normal business operations. Often abbreviated as OPEX.

Rents and purchased transportation

Salaries, wages and employee benefits

Fuel and fuel taxes

Depreciation and amortization

Operating supplies and expenses

General and administrative expenses, net of asset dispositions

Insurance and claims

Operating taxes and licenses

Communication and utilities

Operating Expenses

Year over year growth in Revenue and Operating Expenses.

Revenue Y/Y

OpEx Y/Y

Growth

Shares outstanding refer to a company's stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company's officers and insiders.

Outstanding Shares

Market Cap

Also known as Price/Sales Ratio. Calculated using Average market cap for the quarter / Annualized quarterly revenue.

Revenue Multiple

At its core, J.B. Hunt is an intermodal marketing company; it contracts with the Class I railroads for the line-haul movement of its domestic containers. It was one of the first for-hire truckload carriers to venture into intermodal shipping, forming a partnership with BNSF Railway in the West in 1990, followed by an agreement with Norfolk Southern in the East. Hunt has established a definitive leadership position in intermodal shipping, with a 20%-plus share of a $30 billion industry. The next-largest competitor is Hub Group, followed by the intermodal divisions of Schneider National, STG Logistics, and Knight Swift. Intermodal made up around 48% of Hunt's total revenue in 2023.

Hunt isn't immune to downturns, but over the past few decades, it's reduced its exposure to asset-based truckload shipping, which represents about 34% of sales (including for-hire and dedicated-contract business) versus 60% in 2005. It is also shifting its for-hire truckload operations to more of an asset-light model via its drop-trailer offering and owner-operators, while investing in asset-light truck brokerage and final-mile delivery. 

The onset of rail service shortfalls in second-half 2021 throttled Hunt's container volume despite positive demand trends linked to the pandemic-driven retailer restocking surge. Service levels recovered in late 2022 and 2023 (a positive for truck-to-rail conversions), but retail end-market demand softened on elevated inventory levels. Thus, 2023 was a challenging year of normalization for the trucking and intermodal markets. 2024 should bring intermodal volume and pricing stabilization as demand trends improve and competition from the truckload industry eases, but this will be a factor to watch closely. 

Hunt's long-term growth prospects remain favorable, especially for intermodal. Our outlook isn't without risk, but we expect normalized real US retail sales growth and truck-to-rail conversions to support 2.5%-3.0% broader intermodal industry volume expansion on average over our forecast horizon, with 2.0%-2.5% core pricing gains. We suspect Hunt will modestly outperform those trends, given its favorable competitive positioning on BNSF's rail network.

Business Strategy & Outlook

Because the for-hire full-truckload industry can be a tough business in which to differentiate, our narrow moat rating for J.B. Hunt primarily stems from the company's intermodal shipping operations, which benefit from a combination of the network effect and scale-based cost advantage. In terms of scale, it would be difficult for a small competitor to replicate Hunt's vast in-house drayage capabilities (more than 6,300 tractors) and fleet of more than 115,000 53-foot-high cube containers capable of double stacking—by far the largest in the industry. The firm's intermodal container fleet provides preferred access to rail capacity and would be costly to replicate. Preferred access is no small edge, given that the truck-versus-rail decision for shippers is heavily influenced by service levels (in addition to the cost gap). We think this is one key reason Hunt has outperformed its peers in terms of container volume growth (on average) over the past decade.

The concept of the network effect suggests that the value of a service becomes more powerful and tougher to replicate with more buyers and suppliers. In its core intermodal business, Hunt's massive network of shippers and long-standing partnerships with Class I rail carriers reinforce a compelling value proposition and generate healthy barriers to entry because duplication by small providers with fewer resources would prove difficult. For shippers (customers), the firm's immense customer base affords significant buying power (greater rail capacity access—which is finite—and discounts), and its industry-leading container fleet acts as a highly valuable source of capacity. Intermodal services are also highly convenient, providing for a single freight bill and shipment reporting, including track and trace from origin to destination, which makes for a seamless transaction. 

From the perspective of suppliers—the Class I railroads—Hunt is a very attractive source of cargo because of its ability to aggregate fragmented demand across an immense pool of retail end-market shippers (across the size spectrum) looking to capitalize on multimodal capabilities.

Over the longer term, we expect secular constraints on full-truckload capacity growth to keep the intermodal value proposition strong by prompting shippers to turn to multimodal solutions, especially during periods of tight truckload supply. Key headwinds to truckload industry capacity, which make intermodal more attractive, include the limited driver pool and gradually intensifying regulatory restrictions. We think Hunt remains well positioned to capitalize on truck-to-rail conversions (especially on shorter-haul lanes in the Eastern US) over the next decade thanks to its vast network of shippers and long-standing relationships with the major Class I railroads. Its highly favorable pricing arrangement with BNSF stands as a testament to the firm's healthy rail relationships. Despite intermittent headwinds from rail service snafus, intermodal shipping will continue to play a crucial role in the future of US transportation, and Hunt is well positioned to benefit from the mode's long-term growth potential while also keeping the competition at bay. 

During the past five years, Hunt has generated a total average adjusted return on invested capital of more than 16%, which compares favorably with our approximate 8.5% cost of capital estimate. The 10-year average is near 17%. Fluctuations over the years have primarily come from cyclical changes in freight demand and pricing.

Narrow

Economic Moat

J.B. Hunt Transport Services

J.B. Hunt Transport Services, Inc. engages in the provision of logistics solutions. It operates through the following segments: Intermodal (JBI), Dedicated Contract Services (DCS), Integrated Capacity Solutions (ICS), Final Mile Services (FMS) and Truckload (JBT). The JBI segment offers intermodal freight operations for rail carriers. The DCS segment includes private fleet conversion and final-mile delivery services. The ICS segment provides single-source logistics management for clients who intend to outsource their transportation activities. It offers flatbed, refrigerated, expedited, less-than-truckload, dry-van, and intermodal freight services. The FMS segment provides final-mile delivery services to customers through a nationwide network of cross-dock and other delivery system network locations. The JBT segment is responsible for full-load, dry-van freight that is transported via roads and highways. The company was founded by Johnnie Bryan Hunt, Sr. and Johnelle D. Hunt on August 10, 1961, and is headquartered in Lowell, AR.

Earnings data Q2 2024

JBHT reports muted freight demand in Q1 2023 earnings call

JBHT's Q1 2023 performance was impacted by muted freight demand and negative trends in Intermodal volumes. Despite challenges, the company remains committed to disciplined investments, cost management, and sees growth opportunities in managing costs, growing with customers, and focusing on safety initiatives.

JBHT reports muted Q2 performance, eyes West Coast import opportunities

JBHT's Q2 performance reflected challenges in truckload capacity and intermodal volumes in the East, while highlighting its resilience and commitment to long-term investments. The company faces cautious customer inventory ordering and uncertainties in the holiday shipping season. However, opportunities in the West Coast import market and a focus on cautious equipment growth present potential for future growth.

JBHT reports Q3 revenue decline but shows resilience in segments

JBHT's Q3 2023 performance reflects challenges in the freight environment but also highlights resilience in certain segments. The company remains committed to delivering value for customers, focusing on long-term returns for shareholders, and maintaining a prudent approach to short-term costs. Opportunities lie in improving Intermodal margins, capitalizing on joint initiatives, and maintaining a healthy pipeline in the Dedicated segment.

JBHT reports solid Q4 performance, addresses insurance challenges proactively

JBHT's Q4 2023 performance showcased resilience and strategic focus amid industry challenges. The company reported solid performance, highlighted its strengths in safety and technology, acknowledged challenges in insurance and freight, and emphasized opportunities for growth and proactive risk management. Overall, JBHT remains well-positioned for long-term success and shareholder returns.

Revenue

Cost of revenue

Gross profit

Operating expenses

SG&A

Other

Operating income

EBITDA

Net income

Earnings per share

Total assets

Current assets

Cash & equivalents

Receivables

Inventory

Non-current assets

Net PPE

Intangibles

Total liabilities

Current liabilities

Short term debt

Income tax payable

Non-current liabilities

Long-term debt

Total equity

Stockholders equity

Minority interest

Total liabilities & equity

Total debt

Net debt

Book value per share

Cash from operations

Funds from operations

Change in working capital

Cash from investing

Capital expenditure

Purchase/sale of investments

Purchase/sale of business

Other sources

Cash from financing

Change in stock

Change in debt

Cash dividends paid

Cash from other sources

Net change in cash

Free cash flow

LOWELL, Ark.--(BUSINESS WIRE)--J.B. Hunt Transport Services, Inc., (NASDAQ: JBHT) announced third quarter 2020 net earnings of $125.5 million, or diluted earnings per share of $1.18 vs. third quarter 2019 net earnings of $118.4 million, or $1.10 cents per diluted share. Included in the third quarter 2019 results were pre-tax charges of $44.2 million or $0.30 per share related to arbitration, including legal and interest charges. Total operating revenue for the current quarter was $2.47 billion,

J.B. Hunt Transport Services, Inc. Reports Earnings for the Third Quarter 2020

BlackRock

Pool

Sleep Number

There are four stocks with a favorable Zacks Rank that are poised to beat on quarterly earnings this week.

4 Top Stocks Poised to Beat Q3 Earnings Estimates This Week

JB Hunt (JBHT) possesses the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

JB Hunt (JBHT) Expected to Beat Earnings Estimates: Should You Buy?

Impressive performances at key segments are likely to get reflected in J.B. Hunt's (JBHT) third-quarter top line.

Is a Beat Likely for J.B. Hunt (JBHT) Stock in Q3 Earnings?

LOWELL, Ark.--(BUSINESS WIRE)--J.B. Hunt Transport Services, Inc., (NASDAQ: JBHT) announced today that it expects to issue third quarter 2020 earnings before the market opens on Friday, October 16, 2020. It will hold a conference call from 9:00-10:00 a.m. CST on the same day to discuss the quarterly results and answer questions from the investment community. To participate in the call please dial 1-833-397-0851 (domestic) or 516-575-8759 (international) 15 minutes prior to the start of the call

J.B. Hunt Transport Services, Inc. Announces Third Quarter 2020 Earnings Release Date and Conference Call Information

J.B. Hunt (JBHT) has seen solid earnings estimate revision activity over the past two months, and belongs to a strong industry as well.

Is J.B. Hunt (JBHT) Stock a Solid Choice Right Now?

Old Dominion Freight Line

JBHT vs. ODFL: Which Stock Is the Better Value Option?

Century Communities

Quaker Chemical

Sturm, Ruger & Company

Schweitzer-Mauduit

Markets today are firmly in the red, as the Dow is seeing major drops, down nearly 290 pts.  The Fed’s announcement that they would hold interest rates at or near 0% through 2023 did little to excite the markets.

Best Stocks To Buy Today As Markets Respond To Fed’s Recovery Outlook

J.B. Hunt Transport Services, Inc. Announces Participation in Upcoming Conference

JB Hunt (JBHT) reported earnings 30 days ago. What's next for the stock?

Why Is JB Hunt (JBHT) Up 3.5% Since Last Earnings Report?

J.B. Hunt Transport Inc. is running drayage from the Port of Los Angeles in a Freightliner eCascadia battery-electric truck.

J.B. Hunt Gets Dibs On Trying Out Freightliner Electric eCascadia

J.B. Hunt Makes First Company Delivery Using the All-Electric Freightliner eCASCADIA

J.B. Hunt Discloses 2019 Sustainability Metrics and Provides Road Map for Progress in New Report

J. B. Hunt Transport Services, Inc. Announces Payment of Dividend

J B Hunt Transport Services Inc (NASDAQ: JBHT) stock traded higher Friday after the company reported earnings and revenue beats Thursday afternoon.

JB Hunt's Q2 Beat Sends Stock To All-Time Highs: What 5 Analysts Have To Say

Weak revenues at the Intermodal division hurt J.B. Hunt's (JBHT) Q2 performance.

J.B. Hunt (JBHT) Q2 Earnings Down Y/Y on Intermodal Woes

J.B. Hunt Transport Services, Inc.'s (JBHT) CEO John Roberts on Q2 2020 Results - Earnings Call Transcript

J.B. Hunt Transport Services' (NASDAQ: JBHT) first quarter was much better than feared.

J.B. Hunt Handily Beats 2Q Expectations

JB Hunt (JBHT) delivered earnings and revenue surprises of 37.35% and 4.11%, respectively, for the quarter ended June 2020. Do the numbers hold clues to what lies ahead for the stock?

JB Hunt (JBHT) Tops Q2 Earnings and Revenue Estimates

JB Hunt (JBHT) earnings for the transportation company's second quarter of 2020 have JBHT stock on the rise after markets closed on Thursday.
The post JB Hunt Earnings: JBHT Stock Jumps 3% on Q2 Beats appeared first on InvestorPlace.

JB Hunt Earnings: JBHT Stock Jumps 3% on Q2 Beats

J.B. Hunt Transport Services, Inc. Reports Earnings for the Second Quarter 2020

J.B. Hunt reports after the close, after trucker Heartland Express beat and indicated a volume recovery. J.B. Hunt stock rose.

J.B. Hunt Rallies With Earnings On Tap As Trucker Heartland Signals Recovery

Impact of Sluggish intermodal volumes is likely to get reflected in J.B. Hunts'(JBHT) second-quarter 2020 performance.

What's in Store for J.B. Hunt (JBHT) Stock in Q2 Earnings?

ArcBest

Knight-Swift Transportation Holdings

The transportation team at Bank of America Merrill Lynch (BOAML) is bullish on trucking stocks, raising the price objectives on a handful of them by several dollars per share.

News for J.B. Hunt Transport Services Stock (JBHT)