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 Wednesday plans to grow its intermodal container fleet to 150,000 units over the next three to five years. The additional capacity would expand the fleet by more than 40% from the close of 2021.

J.B. Hunt to expand intermodal container fleet by 40%

LOWELL, Ark. & FORT WORTH, Texas--(BUSINESS WIRE)--J.B. Hunt, BNSF are launching a joint effort to improve capacity in the intermodal marketplace while meeting the expanding needs of customers.

J.B. Hunt, BNSF Announce Joint Initiative to Improve Intermodal Capacity Challenges

J.B. Hunt has seen a very strong 2021, notably on the sales front.

J.B. Hunt: Not Loading Up The Truck Here

JB Hunt (JBHT) is well positioned to outperform the market, as it exhibits above-average growth in financials.

Is JB Hunt (JBHT) a Solid Growth Stock? 3 Reasons to Think " Yes "

AmerisourceBergen

Archer-Daniels-Midland Company

NVIDIA

Tractor Supply

J.B. Hunt (JBHT), Archer-Daniels (ADM), NVIDIA (NVDA), Tractor Supply (TSCO) and AmerisourceBergen (ABC) could be compelling picks for investors seeking safe and consistent income.

5 Dividend Growth Stocks for Safe and Consistent Income

LOWELL, Ark.--(BUSINESS WIRE)--J.B. Hunt Transport Services, Inc. (NASDAQ: JBHT) President and Chief Executive Officer John Roberts, Chief Commercial Officer and EVP of People and Human Resources Shelley Simpson, and Chief Financial Officer and EVP of Finance John Kuhlow will address the Raymond James 43rd Annual Institutional Investors Conference at 1:05 p.m. eastern time on Tuesday, March 8, 2022. Investors may access the live presentations by visiting the Newsroom section of our website at w

J.B. Hunt Transport Services, Inc. Announces Participation in Raymond James 43rd Annual Institutional Investors Conference

When a stock breaks out above the 50-Day simple moving average, good things could be on the horizon. How should investors react?

JB Hunt (JBHT) Crossed Above the 50-Day Moving Average: What That Means for Investors

GATX

Schneider National

Dividend growth stocks like GATX, J. B. Hunt (JBHT) and Schneider (SNDR) should grace the portfolios of investors interested in the transportation sector.

3 Transportation Stocks to Own on Rising Dividend Payouts

Knight-Swift Transportation Holdings

Old Dominion Freight Line

With the value of truck transportation in the spotlight after protests in Canada, here are three trucking stocks that fly under the radar. The post 3 Trucking Stocks to Keep an Eye On Amid the Convoy Crisis appeared first on InvestorPlace.

3 Trucking Stocks to Keep an Eye On Amid the Convoy Crisis

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

JB Hunt (JBHT) Down 4.8% Since Last Earnings Report: Can It Rebound?

Fleet productivity improvement and increase in truck load count are driving growth for J.B. Hunt (JBHT).

Here's Why You Should Grab the J.B. Hunt (JBHT) Stock Now

LOWELL, Ark.--(BUSINESS WIRE)--J.B. Hunt Transport Services, Inc. (NASDAQ: JBHT) Executive Vice President and President of Intermodal Darren Field and Senior Vice President of Highway Services Josh Phelan will address Citi's 2022 Global Industrial Tech and Mobility Conference at 12:10 p.m. EST on February 22 and Barclays Industrial Select Conference at 10:55 a.m. EST on February 23. Investors may access the live presentations by visiting the Newsroom section of our website. A presentation repla

J.B. Hunt Announces Participation in Upcoming Investor Conferences

Here is Why Growth Investors Should Buy JB Hunt (JBHT) Now

Alphabet

Analog Devices

Ares Management

Danaher

Nasdaq futures traded sharply lower this morning after Meta Platforms, Inc. (NASDAQ: FB) reported worse-than-expected Q4 EPS results and issued weak forecast. When insiders sell shares, it indicates their concern in the company's prospects or that they view the stock as being overpriced.

Alphabet And 4 Other Stocks Sold By Insiders

LOWELL, Ark.--(BUSINESS WIRE)--J.B. Hunt Transport Services Inc. (NASDAQ: JBHT), one of the largest supply chain solutions providers in North America, today announced it has been recognized by Fortune as one of the World's Most Admired Companies for the 11th time in company history. “At J.B. Hunt, we're continually seeking new opportunities to generate value for our customers and transform our industry,” said John Roberts, president and CEO at J.B. Hunt. “This recognition is a testament to the

J.B. Hunt Recognized as One of the World's Most Admired Companies by Fortune Magazine for the 11th Time

Ameriprise Financial

Texas Instruments

Exxon Mobil

We have narrowed our search to five large-cap momentum stocks that have solid upside left for 2022. These are: XOM, TXN, TSCO, JBHT and AMP.

5 Top Momentum Picks for February After a Tumultuous January

J.B. Hunt (JBHT) aims to expand its Final Mile network through the Zenith Freight Lines buyout for approximately $87 million.

J.B. Hunt (JBHT) to Buy Zenith Freight Lines From Bassett

Experian PLC

KB Home

Raymond James

Tapestry

It is advisable to follow broker rating upgrades for robust returns. Hence, we pick Tapestry (TPR), KB Home (KBH), Raymond James (RJF), J.B.

5 Stocks With Upgraded Broker Ratings to Buy for Solid Gains

Bassett Furniture

J B Hunt Transport Services Inc (NASDAQ: JBHT) has agreed to acquire the assets of Zenith Freight Lines LLC, a wholly-owned subsidiary of Bassett Furniture Industries Inc (NASDAQ: BSET), for about $87 million. Based in Conover, NC, and founded by Jack and Debbie Hawn, Zenith provides specialized LTL transportation services for furniture manufacturers and retailers in the continental U.S.

J B Hunt To Acquire Zenith Freight Lines From Bassett For ~$87M

J.B. Hunt Transport announced Monday it entered an agreement to acquire furniture hauler Zenith Freight Lines for $87 million. The deal is expected to bolster J.B.

J.B. Hunt acquires furniture hauler from Bassett in $87M deal

BASSETT, Va. & LOWELL, Ark.--(BUSINESS WIRE)--J.B. Hunt Transport Services Inc. (NASDAQ: JBHT), one of the largest supply chain solutions providers in North America, and Bassett Furniture Industries, Inc. (NASDAQ: BSET), a leading manufacturer and marketer of high-quality home furnishings, announced today that Bassett and J.B. Hunt Transport, Inc., the wholly-owned operating subsidiary of J.B. Hunt Transport Services, Inc., have entered into a definitive agreement under which J.B. Hunt Transpor

J.B. Hunt to Acquire Zenith Freight Lines From Bassett

Ally Financial

Banner

Colony Bankcorp

Delek Logistics Partners

Fastenal

First Community

Graham Holdings

Independent Bank

Lamb Weston Hlds

All stocks have at least five fiscal years of dividend growth history and come from the U.S. Dividend Champions List. They have an average increase of 9.5% and a median increase of 5.3%. I've tracked 37 increases in 2022.

11 Upcoming Dividend Increases

CONSOL Coal

Cushman & Wakefield plc

Shell (RDS.A), J.B. Hunt Transport Services (JBHT), Concentrix (CNXC), ExxonMobil (XOM) and Cushman & Wakefield (CWK) are five stocks with explosive relative price strength.

Shell & 4 Other Stocks With Solid Relative Price Strength

JB Hunt (JBHT) has been upgraded to a Zacks Rank #1 (Strong Buy), reflecting growing optimism about the company's earnings prospects. This might drive the stock higher in the near term.

JB Hunt (JBHT) Moves to Strong Buy: Rationale Behind the Upgrade

Alcoa

BankUnited

PacWest Bancorp

These four relatively safe buy-ranked stocks reported strong earnings results this week.

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