Strong Results Power J.B. Hunt To New High
J.B. Hunt (NASDAQ: JBHT) is proof that the troubles plaguing the global supply chain are ultimately a good thing, at least for some companies. While these issues are having an impact on results, results are strong and driven by incredibly high demand across all segments. The key takeaway is that results could have been better if not for a lack of labor and we don't see demand subsiding anytime soon. What this means for J.B. Hunt and the trucking industry at large is that business will be strong for some time to come and the only limit to revenue and earnings is how many trucks they can keep on the roads.
J.B. Hunt Beat Consensus Despite Headwinds
J.B. Hunt had a great quarter despite mounting headwinds throughout the global supply chain. The company reported $3.14 and consolidated revenue which is good for a gain of 27.1% over last year. Last year, revenue grew a little more than 4.5% YOY so this is a very strong comparison. Better, the revenue beat the Marketbeat.com consensus estimate by 360 basis points and could easily have been much stronger if not for labor shortages.
J.B. Hunt on labor: "This year, we have reached all-time highs in the need for company drivers in all segments as well as openings we have on our office and field teams... we also see persistent irregularities in demand patterns substantially resulting from port, labor and inventory challenges with our customers."
On a segment basis, all segments reported double-digit increases with notable strength in the Truckload and Integrated Capacity Solutions portions of the business. Those two segments grew 87% and 55% on significant increases in volume and pricing while Intermodal, Dedicated Contract Services, and Final Mile grew a smaller 17%, 20%, and 13% respectively. It is noteworthy that Intermodal Revenue grew 24% on higher pricing but was offset by a 6% decline in volume. A decline in Intermodal volume is ridiculous with the number of container ships sitting off the coast of California.
Moving down the report, the company was able to widen its margins despite rising costs for labor and rail capacity. The company reports operating income grew by 56% to drive strong results on the bottom line. On the bottom line, the companies $1.88 in GAAP earnings beat the consensus by a dime. As for the outlook, the company does not give guidance for revenue or earnings but did provide some color on what it expects in the coming quarter and the coming year. The company expects bottlenecks in California to get worse, for labor shortages to persist, for the price of shipping and freight to remain high, and for higher pricing to remain in place indefinitely.
J.B. Hunt Is A Dividend You Can Bank On
J.B. Hunt doesn't pay a high yield but it pays an incredibly safe yield and one that you can count on. The payout is running near 0.65% with shares trading near $190 with a payout ratio of 17%. The company has been growing the distribution for 17 years so there is a high expectation for dividend increases as well. The caveat is that increases have been running in the range of 5% to 6% so we aren't expecting any big payment increases right now. The balance sheet is also very strong with relatively high levels of cash and ample coverage so there are no red flags there.
The Technical Outlook: J.B. Hunt Rockets To New High
Shares of J.B. Hunt gained more than 8.5% in the wake of the Q3 earnings report and look like they will be moving higher. The move broke price action out of a consolidation range and closed at a new all-time high with strongly bullish indicators in support. It is our assessment that price action will move up to the $200 level fairly soon and then continue to move higher into the end of the year. Assuming the company can make some headway with hiring, J.B. Hunt could move up to the $240 range over the next 6 to 12 months.
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