Goldman Sachs Upgrades J.B. Hunt To Buy
Price action in J.B. Hunt (NASDAQ: JBHT) has been trending steadily higher since hitting the pandemic bottom and we think that trend will continue. Not only are there economic tailwinds to support the business but also the hope of supply chain improvement in the back half of the year. Analyst support is another big factor because they too have noticed the trends and see the potential for both revenue earnings growth. The trend in sentiment is bullish and gaining momentum with the last four commentaries including rating upgrades as well as price target increases. The latest is from Goldman Sachs which upped its rating to Buy from Neutral and hiked its price target by almost 14% to $231.
Analyst Jordan Alliger said in the note "If we are moving in the right direction in terms of improved supply chain fluidity, it should translate to the better box turns that we now anticipate, and most importantly lead to catch-up volume growth (as anchored ships unload) and better overall ability to translate underlying industry volumes into Hunt realized container loads."
The consensus rating of the 19 analysts currently rating the stock is a weak Buy and up from Hold in the 30 and 90 periods. The Pricetargets.com consensus price target is $205.60 compared to Goldman’s $231 and implies about 6% of upside for the stock. The high price target is $240 or about 50% of upside from the recent price action.
The Institutions Like J.B. Hunt
Institutional support for J.B. Hunt is high and growing but activity has taken a breather so far in Q1. While the institutions picked up a net 3.5% of the market cap (with shares trading at their new highs) over the past year their activity is net bearish for the first 9 weeks of 2022. The caveat with that is the selling is worth only 0.4% of the market cap and can be attributed to profit-taking and rotation. With shares trading 135% above their COVID-lows and at all-time highs, a little profit-taking is to be expected. The question is what comes next and it looks like higher prices if the analysts have any say in the matter.
Turning to the revenue and earnings outlook, we think the analysts are underestimating the current quarter and full-year results. The analysts are looking for a sequential downtick in revenue for the current quarter which is seasonally expected but much larger than previous years. In our view, with backlogs rising among many industries the seasonal downtick will be much smaller than usual and possibly nonexistent. As for the year, revenue is expected to grow by 14% but doesn’t factor in recent acquisitions or momentum gains we’re expecting in the back half of the year.
J.B. Hunt’s Dividend And Buybacks Will Help Drive Price Action
J.B. Hunt is not a high-yielding stock but it is a safe yielding at 0.85% and one with a high expectation for aggressive increases. The payout ratio is running below 20% with ample cash flow and few impediments on the balance sheet. Add in organic revenue and earnings growth along with acquisitional growth and the stage is set for another 8 years of annual increases and possibly sustained at a double-digit CAGR.
Turning to the charts, price action in J.B. Hunt has been trending higher and is up more than 3.5% in the wake of the upgrade. This action confirms support at the short-term moving average and has price action back above the $200 level. In our view, shares of J.B. Hunt are on track to test and set new all-time highs and may do so before the next earnings report is released in mid-April 2022.
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