Strong Fourth Quarter Propels J.B. Hunt Full-year Earnings 29% Higher

Lowell-based J.B. Hunt Transport Services led the way to profitability in 2011 despite ongoing economic challenges that provided limited visibility for the transportation industry.

J.B.Hunt tallied up annual profits of $257 million during fiscal 2011, up 28.7% from 2010. The company’s annual revenues (including fuel surcharges) rose 19.5% to $4.53 billion compared $3.79 billion to 2010. Hunt’s fiscal year coincides with the calendar year.

Today (Jan. 26) after the market closed, the local trucking giant reported fourth quarter net income of $72.6 million, up 25% from a year ago. These earnings equate to 61 cents per share, 33% better than the 46 cents earned a year ago. The fourth quarter earnings included a $3.9 million charge related to severance agreements with executive retirees and a charitable contribution, which totaled 2 cents per share. The net results beat Wall Street’s 58-cent earning consensus for the quarter.

Revenues generated in the recent quarter ending Dec. 31 improved to $1.2 billion, rising 17.6% from the same period in 2010.

“We are very pleased to close out the year with record revenues, net earnings and earnings per share in both the fourth quarter and the entire year of 2011,” said Hunt CEO John Roberts.

All four of Hunt’s operating segments outperformed 2010 levels, the release stated.

“During 2011, we began implementing improvements to the approach we take with our larger, more complex customers and we are satisfied so far with the results of these efforts. The primary objective in collaborating with customers is to find new ways to integrate our complementary business segments to drive out cost and create efficiency. We will continue to invest in customer centric services that produce sufficient rates of return and sustainable cycles of cash for further reinvestment and innovation in transportation solutions,” Roberts noted.

Analysts seem confident Hunt can carry the momentum forward into 2012. Wall Street expects J.B Hunt to earn $ 2.44 per share in 2012, with a target share price of $53. Hunt’s balance sheet remains strong with $5.5 million in net cash at the end of 2011, carrying $749 million in total debt.

Hunt spent $446 million in capital expenditures last year versus $226 million in 2010.

Jack Waldo, analyst with Stephens Inc, notes J.B. Hunt as an industry leader that “continues to grow earnings at a 15-to 20% clip despite a lethargic GDP environment.”

Hunt’s diversified business model creates a relatively stable earnings stream that allows the company the ability to take marketshare away from competitors in almost any economic climate, he added.

PROFITS BY SEGMENT
The shining star in Hunt’s diversified business model continues to be the intermodal segment, which involves truck-to-rail shipments. Intermodal operating income totaled $301 million in 2011, a hefty 27% jump over the prior year. Segment revenues totaled $2.67 billion, representing 59% of the company’s business in 2011.

“By historical standards, Hunt had one of the biggest intermodal capital spending years on record in 2011, increasing its container count by 7,800 containers, or 17%. In 2011, the company added more containers than it added in 2009 and 2010 combined and exceeded the aggregate growth from 2001 through mid-2006.,” Waldo said. “This expanded capacity should put Hunt in an ideal position to capture further road-to-rail conversions, particularly east of the Mississippi River.”

Jason Seidl, transportation analyst at Dahlman Rose & Co., said last week, his fourth quarter survey of major U.S. railroad shippers revealed a positive swing in sentiment. He said shippers anticipate an average base rate increase of 4.4% over the next 6-12 months, which will also bode well for truckers who piggy-back on rail.

The Dedicated Contract Service division also scored big in 2011 — ringing up operating profits of $103 million, compared to $82.4 million in 2010. Revenue topped $1 billion and comprised 23% of the company’s total business in 2011. This segment increased its tractor fleet 17% through the first nine months the year, the biggest annual addition since 2006. Load growth grew 9% during 2011, primarily from new accounts.

The traditional trucking segment posted $26.7 million in annual operating profits, up 42% from the prior year. Total revenue rose to $504 million, up 5% from 2010.

Waldo said Hunt management’s philosophy on raising truckload rates to reflect the realities of the new trucking market in encouraging and is showing in this segment’s profitability.

The company’s freight brokerage segment — Integrated Capacity Solutions — recorded 2011 operating profits of $13.1 million, representing a 34% gain from the prior year. ICS revenues rose to $356 million, up from $291 million a year ago. This segment used 28,800 third-party carriers in 2011, hauling 63,997 loads averaging $1,545 each.

JBHT OUTLOOK
• Wall Street paints a rosy picture for J.B. Hunt shares in 2012. The stock (NASDAQ: JBHT) ticked up 2% ahead of the release, flirting with the $50 range in heavy mid-day trading. Shares closed at $49.30, up 67 cents. In the past 52 weeks, the share price has ranged from a low $34.42 to a high $49.99, set intraday (Jan. 26).

• Dan Fitzpatrick, president of Stockmarket Mentor, recently said Hunt shares are on a nice roll. He remains bullish on the company.

• CNBC Mad Money host Jim Cramer also likes Hunt. A month ago he recommended the shares when the stock was trading at $45.26 per share.

• Conversely, Stifel Nicolaus recently downgraded JBHT shares from a buy to a hold position citing the upside potential was likely already factored into the share price, given its steady upswing.

Kim Souza with our content partner, The City Wire, is the author of this report. She can be reached at [email protected].