J.B. Hunt Wows Market With Cost-Recovery Efforts
J.B. Hunt (NASDAQ: JBHT) wowed the analysts with its Q4 results, results that show not only the impact of rising demand and cost of shipping but also widening margins. The company has been working hard on a suite of “cost-recovery” efforts over the past year that have helped it leverage the revenue strength spurred by pandemic spending. What this means for the market is another readjustment of outlook and this time it will be for the better. There’s been only one shout-out from the analysts since the Q4 results were released but we don’t think it will be the last. The trend in sentiment is decidedly bullish and there is still plenty of room for the market to run.
The Pricetargets.com consensus sentiment on J.B. Hunt is still only a firm Hold but that will change to a weak Buy with only one or two more upgrades. As it stands, there are 19 analysts covering the stock with 9 Buys, 9 Holds, and 1 Sell-equivalent rating from JPMorgan Chase. That was set back in October of 2021 so is one we think is highly susceptible to change.
Regardless of the consensus rating, the Pricetargets.com consensus price target is rising steadily and made a big jump over the last month. The consensus target of $195 is up 34% over the last year and 6.5% in the last month and is still lagging the price action. The takeaways are that the high price target of $233 was set very recently and the trend of sentiment (6 analysts so far) in 2022 is for the stock to trade well above $200 and we see both the consensus and high price target move higher over the next quarter.
J.B. Hunt Transportation Services Beats And Guides Strongly
J.B. Hunt Transportation Services has been riding some strong tailwinds, tailwinds already strong enough to overcome labor shortages, and now it seems as if the obstacles to growth are dissipating. The company reported $3.5 billion in net revenue for a gain of 27.7% on top of last year's near 12% advance. The gains were made on broad strength across all segments and beat the consensus by 640 basis points. On a segment basis, Intermodal (the largest segment) grew 26% while Trucking, ICS, DCS, and Final Mile grew 26%, 25%, and 4% respectively.
On top of that, the gains were coupled with significant improvements in margins. Moving down to the income, the company reports a 55% increase in operating income attributed to cost-recovery and savings efforts in all segments. On the bottom line, the GAAP EPS of $2.28 grew 58% YOY and beat the consensus by $0.26.
J.B. Hunt did not give any formal guidance for the coming quarter or year but it looks like momentum is building in both revenue and earnings. The company did give an update on the current quarter, though, stating the to-date results were up 22% versus the same period in 2021.
Repurchases Are Helping To Drive J.B. Hunt Higher
J.B. Hunt has been repurchasing shares over the past few years and repurchased 76,000 for a total of $15 million during the 4th quarter. Based on the revenue and earnings, we are expecting repurchases to continue. The balance sheet is showing some debt but it appears to be well-managed. Total debt levels are steady in the 1 and 2-year comparisons while leverage is low and coverage ample. We also expect to see J.B. Hunt raise its dividend by the 2nd fiscal quarter of 2022.
Turning to the charts, shares of J.B. Hunt have been trending strongly higher since hitting their COVID-bottom in early 2020. Price action gapped higher after the Q3 report and it looks like the Q4 report will at least spark a trend-following movement if not an outright bullish signal. There is some resistance in the $205 to $207.50 range but we don’t expect to see hold up for long. Once prices move above that level the stage will be set for this stock to move up into the $220 to $230 range.
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