Merrill Cuts Hunt Rating, Tax News Goes Unheralded

Investment firm Merrill Lynch said in late December it cut its rating on shares of J.B. Hunt Transport Services Inc. to “neutral” from “buy.” The news didn’t have an immediate or dramatic affect on the stock and came in the wake of assurances by the company that it intends to “vigorously defend” federal tax deductions it took in 1999.

The deductions concern certain sale-leaseback transactions that the Internal Revenue Service has proposed to disallow.

If Hunt loses its appeal, it could owe as much as $39 million in taxes and interest, according to a company statement, it had $51.8 million in 2002 net income.

The news of the IRS investigation first revealed by a Morgan Stanley analyst in July 2002 sent the Lowell trucking giant’s stock price down by 18 percent in a single day. But the market seemed less concerned by the findings, which J.B. Hunt said it received in the form of a revenue agent’s report on Dec. 15.

“We do not expect to settle this dispute if such a settlement would result in loss of any tax benefits realized,” the company said in its press release.