Retail Restocking Pullback and Normalizing Truckload Pricing To Pressure Hunt's 2023 Results

Senior Equity Analyst

Matthew Young

Revenue segments as reported by the company.

Operating revenues, excluding fuel surcharge revenues

Fuel surcharge revenues

Revenue Segments

Revenue is the money generated from normal business operations. Gross Profit is revenue minus cost of goods sold. Operating Income is revenue minus cost of goods sold and other operating expenses.

Revenue

Operating Income

Revenue & Operating Income

Net Income, also called net earnings, is calculated as revenue minus cost of goods sold, operating expenses, depreciation, interest, taxes, and other expenses.

Net Income

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 47% of Hunt's total revenue in 2022.

Hunt isn't immune to downturns, but over the past decade-plus it's reduced its exposure to asset-based truckload shipping, which represents about 30% of sales (including for-hire and dedicated-contract business) versus 60% in 2005. Hunt 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 meaningfully in asset-light truck brokerage and final-mile delivery. 

Truckload capacity was extremely tight from mid-2020 through much of 2022, thus contract pricing soared across all modes, while intermodal demand jumped on the retail sector restocking boom. That said, the onset of rail service shortfalls in second-half 2021 throttled Hunt's container volumes despite positive demand. Service levels are now recovering (a positive for truck-to-rail conversions), but retail end market demand is softening on sluggish restocking activity. Overall, we expect 2023 to be a year of normalization for the trucking and intermodal markets, before recovering in 2024. 

Hunt's longer-term growth prospects remain favorable, especially for intermodal. Our outlook isn't without risk, but we expect normalized real U.S. retail sales growth and truck-to-rail conversions to support 3.0%-3.5% intermodal-market 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, we think it would be difficult for a small competitor to replicate Hunt's vast in-house drayage capabilities (more than 6,000 tractors) and fleet of more than 100,000 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 a key reason Hunt has outperformed its peers in terms of container volume growth (on average) over the years.

The concept of the network effect suggests that the value of a service becomes more powerful and tougher to replicate with more users. In its core intermodal business, Hunt's large network of shippers and long-standing partnerships with major 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 and discounts), and its industry-leading container fleet acts as a highly valuable source of capacity.

From the perspective of the Class I rail carriers, Hunt is an attractive source of cargo because of its ability to aggregate fragmented demand across an immense pool of customers looking to capitalize on multimodal capabilities.

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 2023

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

J.B. Hunt Transport Services announced Thursday that it has entered a long-term agreement to expedite the delivery of new intermodal containers as well the freight of its customers. A multivessel agreement with Swire Shipping Pte.

J.B. Hunt to expedite delivery of new containers, customer freight

LOWELL, Ark.--(BUSINESS WIRE)--J.B. Hunt Transport Services Inc. (NASDAQ: JBHT), one of the largest supply chain solutions providers in North America, announced today that the cargo vessel Johnelle has docked at the Port of Everett in Washington, with more than 250 new containers reserved for the expansion of J.B. Hunt's intermodal fleet. The Johnnie Bryan, a second cargo vessel, is expected to dock at the Port of Hueneme in California next month with additional new containers. The two are part

J.B. Hunt to Expedite Overseas Delivery of New Containers and Customer Freight With Long-Term Service Agreement

J.B. Hunt (JBHT) and Waymo advance their autonomous trucking collaboration by delivering goods for Wayfair along the I-45 corridor on the Houston-Dallas route as part of the pilot.

J.B. Hunt (JBHT), Waymo Add Wayfair to Test Autonomous Trucks

LOWELL, Ark.--(BUSINESS WIRE)--J.B. Hunt Transport Services Inc. (NASDAQ: JBHT), one of the largest supply chain solutions providers in North America, and Waymo, the leading autonomous driving technology developer, announced today the latest development in their collaboration on autonomous trucking technology will include a pilot delivering goods for J.B. Hunt customer Wayfair, one of the world's largest destinations for the home. The latest pilot will span six-plus weeks during July and August

J.B. Hunt, Waymo Add Wayfair to Autonomous Trucking Pilot in Texas

LOWELL, Ark.--(BUSINESS WIRE)--J.B. Hunt Transport Services Inc., one of the largest supply chain solutions providers in North America, announced today it will host the Freedom Drivers Project, a national mobile exhibit on the realities of human trafficking and the measures to combat it, along with the Arkansas Trucking Association. The exhibit, presented by Truckers Against Trafficking, will be available: June 24 (8:30 AM – 2 PM) – J.B. Hunt Corporate Campus in Lowell (parking lot) June 25 (9

J.B. Hunt and Arkansas Trucking Association Bring Truckers Against Trafficking Exhibit to Northwest Arkansas

Strong segmental performances are driving J.B. Hunt's (JBHT) top line.

Here's Why You Should Retain J.B. Hunt (JBHT) in Portfolio Now

J.B. Hunt is yielding just 1%, yet management is accelerating dividend growth, thanks to improving business fundamentals. The company is using technology to get more earnings power from its massive transportation business, which is set to accelerate free cash flow in the years ahead.

J.B. Hunt Is A Way Better Dividend Stock Than Its 1% Yield May Suggest

Schneider National

Appearing at Bank of America's annual transportation conference, management from some of the nation's biggest fleets said they haven't seen any changes in customer demand since reporting first-quarter results a few weeks ago. Management teams acknowledged the sharp decline in spot market fundamentals at the event but said some of that has to do with the relative strength in contract rates, which is driving better adherence to routing guides.

Large carriers still seeing strong demand midway through Q2

Knight-Swift Transportation Holdings

P.A.M. Transportation Services

Trucking stocks are trading like a freight recession is already here. Investor sentiment seems disconnected from actual results and analysts' forecasts. The pandemic and global supply disruptions have hurt many companies, including transportation, placing an attractive buy opportunity on transportation stocks whose year-to-date drops exceed 10%.

3 Top Transportation Stocks To Buy

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

JB Hunt (JBHT) Up 2.9% Since Last Earnings Report: Can It Continue?

Building an intelligent, efficient supply chain requires providers of all types to shed their siloed mindsets and collaborate in areas where in the past that might have been seen as problematic, a top executive at J.B. Hunt Transport Services Inc. (NASDAQ: JBHT) said Monday.

Supply chain's future will be mode-agnostic, J.B. Hunt's Simpson says

Danaos

Landstar System

TFI International

Union Pacific

If transportation stocks represent the economic rubber meeting the road, then their underperformance is a serious warning sign. The post 7 Transportation Stocks to Avoid During These Trying Times appeared first on InvestorPlace.

7 Transportation Stocks to Avoid During These Trying Times

Founded in 1961, JB Hunt Transport Services Inc. ( JBHT , Financial) provides surface transportation, delivery and logistics services to a diverse group of customers across North America.

JB Hunt's Outlook Is Strong Amid Multiple Challenges

ArcBest

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

JB Hunt (JBHT) possesses solid growth attributes, which could help it handily outperform the market.

3 Reasons Why JB Hunt (JBHT) Is a Great Growth Stock

C.H. Robinson Worldwide

Hub Group

Old Dominion Freight Line

USA Truck

GXO Logistics stock is down, making it a good entry point for investors.

Why It's a Great Time to Pick Up This Logistics Stock

LOWELL, Ark.--(BUSINESS WIRE)--J.B. Hunt Transport Services Inc. (NASDAQ: JBHT), one of the largest supply chain solutions providers in North America, held its annual Million Mile Celebration today at corporate headquarters in Lowell to recognize 69 drivers for achieving two, three and four million miles driven without a preventable accident. The company drivers were awarded more than $900,000 in safe driver bonuses. “This celebration is one of our favorite events of the year,” said Nick Hobbs,

J.B. Hunt Honors and Awards 69 Drivers for Safely Driving 2M-Plus Miles

Boyd Gaming

Interactive Brokers

NextDecade

Redfin

Rio Tinto plc Sponsored

Werner Enterprises

Zions Bancorp

Markets dropped to start out Tuesday, with the Nasdaq leading the charge lower, down over 2%.

Chinese Lockdown Problems: Analysts Upgrades or Downgrade Redfin, Rio Tinto and More

LOWELL, Ark.--(BUSINESS WIRE)--J.B. Hunt Transport Services Inc. (NASDAQ: JBHT), one of the largest supply chain solutions providers in North America, was recently named a 2022 Best Employer for Diversity by Forbes, marking the second consecutive year the company has received the distinction. "Building and promoting an inclusive workplace is critical to our organization because it creates an environment where employees are empowered,” said Shelley Simpson, chief commercial officer and executive

J.B. Hunt Recognized as a 2022 Best Employer for Diversity by Forbes

J B Hunt Transport Services Inc (NASDAQ:JBHT) revealed strong growth in all of its businesses this morning, reporting better-than-expected first-quarter results.

Analysts, Options Traders Target Logistics Stock After Strong Earnings

J.B. Hunt's (JBHT) Q1 results benefit from strong revenues across all segments owing to higher volumes, and favorable customer freight mix and pricing.

J.B. Hunt (JBHT) Shares Up on Q1 Earnings & Revenue Beat

Supply chain challenges or not, J.B. Hunt Transportation Services (NASDAQ: JBHT) is firing on all cylinders.

J.B. Hunt Transportation Services Fires On All Cylinders

J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT ) Q1 2022 Earnings Conference Call April 18, 2022 5:00 PM ET Company Participants Brad Delco - Senior Vice President, Finance John Roberts - Chief Executive Officer John Kuhlow - Chief Financial Officer Shelley Simpson - Chief Commercial Officer and Executive Vice President, People and Human Resources Nick Hobbs - Chief Operating Officer and President, Contract Services Darren Field - President, Intermodal Brad Hicks - President, Highway Services Conference Call Participants Chris Wetherbee - Citi Scott Group - Wolfe Research Jon Chappell - Evercore ISI Justin Long - Stephens Ken Hoexter - Bank of America Jordan Alliger - Goldman Sachs Ravi Shanker - Morgan Stanley Amit Mehrotra - Deutsche Bank Allison Poliniak - Wells Fargo Brandon Oglenski - Barclays Bascome Majors - Susquehanna Tom Wadewitz - UBS Brian Ossenbeck - JPMorgan David Vernon - Bernstein Operator Good afternoon. Thank you for attending today's J.B.

J.B. Hunt Transport Services, Inc. (JBHT) CEO John Roberts on Q1 2022 Results - Earnings Call Transcript

J.B. Hunt Transport Services continues to see demand for its services exceed capacity. Management from the company noted moderation in the spot truckload market on a call with analysts Monday night but said that pressure on rates is likely more of a hurdle for smaller carriers not operating under contractual arrangements.

J.B. Hunt sees runway for high demand; small carriers could struggle

Twitter

Even though Q1 earnings season is upon us, Wall Street remains somewhat captivated by the "Elon Musk Buying Twitter" story.

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