J.B. Hunt reaches record earnings in 2012

Lowell-based J.B. Hunt Transport Services Inc. was undaunted by fiscal cliff concerns and talk of slowing economy toward the end of 2012. Instead, the logistics firm focused intensely on growing revenue and bottomline profits with yet another solid quarter and record year.

Shareholders were rewarded Thursday (Jan. 24) as the stock rose nearly 5% to a new high of $66.61 following the earnings release.

Hunt posted fourth quarter profits of $83.97 million, up 15.7% despite a slowing overall U.S. economy between Oct. 1 and Dec. 31. This equates to 70 cents of earnings per share in the recent quarter, slightly ahead of Wall Street’s 69-cent consensus. A year ago Hunt had earnings per share of 61 cents.

For perspective, the firm had $3.9 million in added pretax expense in the 2011 comparison period.

Total revenue for the quarter equaled $1.338 billion, up from $1.204 billion in the prior year, as three of Hunt’s four divisions increased topline and bottomline profits.

FOURTH QUARTER REVENUE (by segment)
• Intermodal $821.208 million, up 13% with an 11% increase in loads.
• Dedicated Services $282.722 million, up 9% linked to new accounts.
• ICS-Brokerage $128.517 million, up 30% due to 47% more loads.
• Trucking $112.722 million, down 12% from a 19% reduction in fleet size.

Operating income for the quarter increased to $143.3 million versus $122.3 million a year earlier.

Hunt said while the had improved results, they were partially offset by increased costs across almost all categories. That said, Hunt’s cost controls allowed for operating income to grow at a faster pace than revenues which improved overall margin.

Lower borrowing costs also helped Hunt’s bottomline results. Net interest expense fell $1 million because of lower interest rates.

RECORD YEAR
Looking at full year performance, Hunt was one of the strongest stories in transportation segment, according to analysts. Total 2012 revenue grew 12% to $5.054 billion which boosted Hunt’s operating income by more than 19% from the prior year.

Despite a slowing economy, Hunt also managed to hang on to more of its net profits posting an annual net income of $310.454 million, up a whopping 20.7% from 2011.

Earnings per share were a solid $2.59, compared to $2.11 in the prior year period.

Hunt’s solid financials have hoisted its share price to record highs in 2012. One year ago Hunt shares were trading at $48.52, the stock price has appreciated more than 36% in the past year.

Stephens Inc. analyst Jack Waldo had set a $62 target price back in October and rated the company a firm buy. Waldo said Thursday he still ranks Hunt a buy and will reset the target price higher now that the carrier has delivered big.

Hunt continues its move away from the capital intensive traditional trucking model by growing its intermodal and brokerage divisions more in 2012. These segments grew in terms of employees while also comprising higher percentages of the firm’s total revenue, compared to 2011.

POTENTIAL HEADWINDS
Hunt noted in its earnings release cost increases in both rail and dray purchased transportation, higher driver wages and insurance and claims were an still an issue in its intermodal division.

In its brokerage segment – ICS – the company had increased costs for additional headcount, a branch network expansion and a single large claim settlement. ICS’s carrier base increased 12% and the employee count increased 18% from a year ago to 453 employees at year-end. 
 
The trucking segment continues shrink its fleet down 27% during 2012, which has reduced capacity. This segment continues to see increased driver and independent contractor pay and fewer gains on the sale of equipment compared to the prior year.

“While Hunt is by no means immune to macro trends, its leading market position and diversified platform put it in a better position than most to navigate through unpredictable times,” Waldo notes.

FINANCIAL SNAPSHOT
Total Revenue
2012: $5.054 billion
2011: $4.526 billion

Net Income
2012: $310.354 million
2011: $257.006 million

Earnings Per Share
2012: $2.59
2011: $2.11