JB Hunt continues to deliver despite tougher trading conditions

J.B. Hunt

US trucking and freight firm JB Hunt reported a solid trading update for the second quarter last week, but there are signs that trading conditions have become more challenging than in the first quarter.

Most of its key financials metrics rose, with total revenues standing at $1.61bn, up 5.2% from $1.53bn one year earlier. Excluding fuel surcharges, sales increased 9% year-on-year.

Its second quarter earnings came in at $105m, or 92 cents per share, against $103m, or 88 cents per share one year earlier. Had its share count not shrunk, EPS would have been only 1% higher in the second quarter, despite the fact that it “had (made) no purchases of common stock during the second quarter 2016”.

That said, in the first half of the year, net earnings rose 5% to $205.1m from $195.3m one year earlier.

Its main operating costs – rents and purchased transportation expenses, salaries, wages and benefits costs – all rose significantly, combined up 8% year-on-year, yet operating income was marginally higher at $176m versus $174m in the second quarter of 2015, helped by lower fuel and fuel taxes expenses. 

The group said that “the benefits of volume growth, increases in revenue producing truck counts and higher equipment utilisation, were substantially offset by increases in rail purchased transportation costs, higher driver wages and recruiting costs and increased equipment ownership costs”, adding that it recorded a “load growth of 9% in intermodal (JBI) and 62% in Integrated Capacity Solutions (ICS), a 5% increase in revenue producing trucks in Dedicated Contract Services (DCS) and an 11% increase in average fleet count in our Truck (JBT) business segment”.

It is also cutting back on heavy investment, with net capital expenditures for the six months ended June 30 at “approximated $258m compared to $299m for the same period 2015”.

Gross debts, meanwhile, stood at $958m against $890m as at 30 June 2015 and $998m as at December 31, 2015. Cash and cash equivalents rose to $11.3m at the end of the second quarter, having more than doubled from $5.5m at the end of December.

“Interest expense in the current quarter decreased due to lower overall debt levels from the same period last year,” it said, adding that the effective income tax rate for the quarter was in line with the past year and is expected to remain unchanged at about 38% in 2016.

Its shares look fully valued, based on forward p/e and EV/EBITDA multiples of 21x and 9.4x, and a forward dividend yield hovering around 1%, although management is delivering a solid performance in soft market for freight forwarders and trucking firms.

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Source: Transport Intelligence, July 27, 2016

Author: Alessandro Pasetti