JB Hunt: Results prove strategy works

Jan. 28, 2011
J. B. Hunt Transport Services, Inc. (NASDAQ:JBHT) today announced glowing 4Q (and year ended) 2010 financial results that could be viewed as very instructive by other truckload and multi-modal carriers

J. B. Hunt Transport Services, Inc. (NASDAQ:JBHT) today announced glowing 4Q (and year ended) 2010 financial results that could be viewed as very instructive by other truckload and multi-modal carriers. One stock analyst observed that Hunt’s firm commitment to holding the line on truckload capacity in the face of shipper demands means it is not just talking about this key issue but “walking the walk” and succeeding from doing so. Hunt’s chief executive, though, offered a much wider view on how the company turned out such impressive numbers.

“In 2010, we continued our strategic mission of integrating our distinct and complementary services, while simultaneously maintaining execution discipline in our four business segments,” said John N. Roberts III, Hunt’s president & CEO in a news release. “Our portfolio of services offers a comprehensive approach to the supply chain solutions we can provide our customers.

“By taking a more ‘horizontal view’ of the flow of inventory beginning with 1) manufacturing and importing, 2) various distribution channels, 3) retail replenishment and 4) final delivery to the consumer, we see a growing correlation in our ability to provide a higher level of value to our customers,” he continued. “Collaborating with strategically minded clients in pursuit of new ways to connect our services and generate increased efficiencies continues to be a priority.”

As relayed by Hunt, here are the big figures: 4Q 2010 net earnings were “$ 57.9 million, or diluted earnings per share [EPS] of 46 cents vs. 2009 fourth quarter earnings of $41.7 million, or 32 cents per diluted share. Total operating revenue for the current quarter was $1.02 billion compared with $877 million for the fourth quarter 2009. This increase in operating revenue was primarily attributable to 13% higher Intermodal segment volumes and revenue growth in our Integrated Capacity Solutions (ICS) and Dedicated Contract Services (DCS) segments. Current quarter operating revenue, excluding fuel surcharges, increased 13% vs. the comparable quarter 2009.”

Hunt also reported that “operating income for the current quarter increased to $97.3 million vs. $72.9 million for the fourth quarter 2009. This increase was primarily due to a 30% increase in Intermodal operating income and positive Truck operating income vs. a loss last year”
Compared with the same period in2009, Hunt also noted, “net interest expense in the current quarter was up $1.4 million, primarily due to higher debt levels. The effective income tax rate for the current quarter was 35.1% vs. 40.7% in 2009. This decrease in the effective tax rate was related to the resolution of uncertain tax positions and a sale last year of all the Company’s interest in Transplace, which increased last year’s tax rate.”

Peter Nesvold, stock analyst with Jefferies & Co, called the Hunt release “one of the most encouraging in-line reports we’ve seen [in] this 4Q…. we saw what we wanted to see in the report.”

Specifically, Nesvold pointed to three key performance factors:

  • How Hunt’s strength was “driven by Intermodal [operations], with margins upsiding our higher-end expectations by $0.03 on in-line revenue.”
  • How its “Truck division's results were in-line with expectations, we like how the company got there.” Nesvold said Hunt cut its tractor count 10% year-over-year (YoY) in the quarter, yet saw revenue per loaded mile, excluding fuel, rise 8% YoY. “This is what we want to see,” he stressed. “In contrast, Knight and Swift earlier this week reported capacity up 4-5%. We think it's critical for the truckload carriers to hold the line on capacity and look for pricing. JBHT is walking the walk.”
  • How its Integrated Capacity Solutions (ICS) unit grew operating income by 89% YoY on revenue growth of 24% YoY. Also, Hunt upped this division’s carrier base 14% YoY. “Both datapoints seem to conflict with the recent bearish thesis on truck brokers that capacity is shrinking faster than the brokers can manage,” Nesvold noted.

”We are generally pleased with the year’s progress of all of our businesses, given the sluggish and prolonged
macroeconomic conditions under which we operate,” Hunt’s Roberts added. “Attention to revenue quality and the appropriate addition of assets across all business segments remain a constant focus.”

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