2015 net income up 14% for J.B. Hunt, fourth quarter income up almost 6%

Full year 2015 net income for Lowell-based J.B. Hunt reached $427.235 million, up 14% compared to 2014. The annual per share earnings of $3.66 beat the consensus estimate thanks to healthy operating income growth in the company’s intermodal and dedicated contract services segments.

The full fiscal year consensus estimate of the 28 analysts who cover the company was per share earnings of $3.65 on total revenue of $6.75 billion.

Total revenue in 2015 was $6.187 billion, just ahead of the $6.165 billion in 2014.

For the fourth quarter, the company posted net income of $116.746 million, better than the $110.306 million in the same quarter of 2014. Per share net income during the fourth quarter was $1.01. Total revenue during the fourth quarter was $1.621 billion, up 0.74% over the $1.609 billion during the 2014 fourth quarter.

The fourth quarter consensus estimate was per share earnings of 99 cents on revenue of $1.62 billion.

Key items in the earnings report, as noted by the company, were:
• The intermodal segment saw 6% load growth in the fourth quarter;
• Truck segment revenue growth of 3% during the fourth quarter was driven by rate increases and an increase in fleet size;
• Improved fuel economy, lower maintenance costs and lower insurance costs helped boost overall operating income during the fourth quarter; and
• Areas with cost increases included driver wages, rail transport, and equipment ownership.

Intermodal, the company’s largest segment, posted fourth quarter operating income growth of $127.7 million, down 1%. Fourth quarter revenue in the segment was $967 million, up 1%.

“Benefits from customer rate increases, a smaller percentage of outsourced dray usage and lower fleet maintenance costs could not offset increases in rail purchased transportation costs, equipment ownership costs and driver recruiting and retention costs,” the company noted in the report released early Thursday (Jan. 21).

SEGMENT PERFORMANCE – fiscal year 2015
Intermodal (JBI) – 59% of total revenue
Revenue: $3.664 billion, down 0.62%
Operating income: $476.685 million, up 3.54%

Dedicated Contract Services (DCS) – 24% of total revenue
Revenue: $1.451 billion, up 4.16%
Operating Income: $163.511 million; up 39.46%

Integrated Capacity Solutions (ICS) – 11% of total revenue
Revenue: $699.525 million, down 2.58%
Operating Income: $35.729 million; up 19.5%

Truck (JBT) – 6% of total revenue
Revenue: $385.51 million; flat
Operating Income: $39.684 million, 64.57%

FREIGHT INDUSTRY TRENDS
Market watchers are becoming somewhat bearish on 2016 freight demand. A late December 2015 note from Baird Equity Research said recent industry trends indicate a possible recession in the U.S. freight sector.

“2016 freight demand outlook is cautious given continued softness in both industrial (US Dollar strength, weak commodity prices) and retail end markets (potential for inventory destocking amid warm winter weather, slowing personal consumption expenditure growth),” noted the Baird report.

The American Trucking Associations reported Jan. 19 that the seasonally adjusted tonnage index for December was up 1.1% following a 0.2% increase in November. Overall, the tonnage index was up 2.6% in 2015 compared to 2014. However, ATA Chief Economist Bob Costello said the trend line is moving in the wrong direction.

“Tonnage ended 2015 on a strong note, but it was not strong for the year as a whole,” Costello noted in his report. “With year-over-year gains averaging just 1.2% over the last four months, there was a clear deceleration in truck tonnage. At the expense of sounding like a broken record, I remain concerned about the high level of inventories throughout the supply chain. The total business inventory-to-sales record is at the highest level in over a decade, excluding the Great Recession period. This will have a negative impact on truck freight volumes over the next few months at least. And, this inventory cycle is overriding any strength from consumer spending and housing at the moment.”

2016 GUIDANCE
For fiscal year 2016, the company estimates a revenue increase range of 9%-12%, and an operating income increase range of 8%-11%.

Capital expenditures in 2016 are estimated at $537 million, just below the $570 million expected for fiscal year 2015. Of the 2016 estimated spending, $230 million will cover equipment replacement, and $238 million for added equipment. Replacement equipment is estimated to include 2,100 trucks ($73 million) in the intermodal segment and 4,000 trailers ($46 million) in the trucking division. New equipment should include 850 trucks ($158 million) for the intermodal segment and 5,900 containers (80 million) in the dedicated contract services segment.

The 2016 capital expenditures also includes $33 million for facilities and $36 million in technology investments.

J.B. Hunt shares (NASDAQ: JBHT) closed Wednesday at $65.72, up 45 cents. During the past 52 weeks, the share price has ranged form a $93.50 high to a $63.58 low.