J.B. Hunt Transport Services hosted its annual shareholders meeting Thursday (April 18) after posting first-quarter earnings and revenue that missed expectations, leading share prices to fall and an analyst to change the company’s stock recommendation to sell.
Shareholders of the Lowell-based carrier declined one stockholder proposal that was supported by the International Brotherhood of Teamsters General Fund, related to political contributions. A majority was required for it to be approved, and 31.7% of shareholders voted in favor. A shareholder proposal on political contributions reporting also failed in 2018.
Shareholders reelected the company’s 10 existing board members with more than 92% of the vote. Following were the members re-elected to a one-year term: Douglas Duncan, Francesca Edwardson, Wayne Garrison, Sharilyn Gasaway, Gary George, Bryan Hunt, Coleman Peterson, President and CEO John Roberts, James Robo and chairman Kirk Thompson.
Since releasing its earnings report Monday (April 15), Deutsche Bank changed its rating on the carrier’s stock from buy to sell, and shares of J.B. Hunt (NASDAQ: JBHT) have fallen $8.36, or 8.6%, and were trading Thursday afternoon at $97.14. In the past 52 weeks, the stock has ranged between $131.74 and $88.38.
In a research bulletin on J.B. Hunt, analysts Brad Delco and Justin Long, and senior associates Scott Schoenhaus and Brian Colley, all of Little Rock-based Stephens Inc., maintained its buy rating on the stock, but lowered its 12-month target by $2 to $116 after the earnings and revenue miss.
After the markets closed Monday, the carrier reported net income rose 1.2% to $119.6 million, or $1.09 per share, in the first quarter of 2019, from $118.14 million, or $1.07 per share, in the same period in 2018. Revenue rose 7.3% to $2.09 billion. The company missed analyst expectations by 17 cents, based on a consensus of 20 analysts. It missed the consensus revenue estimated by $120 million.
“In short, [J.B. Hunt] was negatively impacted by harsh winter weather, rail line closures and softer than expected demand in the first quarter,” Delco, Long, Schoenhaus and Colley said. “While we believe it is more challenging to know the underlying condition of the freight environment given some of these more transient events, we believe that data points from this point forward should improve as more transports report over the coming weeks.”
Freight volume in the carrier’s intermodal segment declined 7.2% in the quarter, and pressure is expected to continue on volumes, which are projected to fall 3% in the second quarter of 2019, according to Delco, Long, Schoenhaus and Colley. Volumes should rise 2% in the second half of 2019 and in 2020. Operating ratio, or expenses as a percentage of revenue, should be 89.3% in 2019 and improve to 89% in 2020.
Margins in the carrier’s Dedicated Contract Services segment are expected to improve in the second quarter as costs fall, the analysts said. The company in February acquired Cory 1st Choice Home Delivery as part of its expansion into the final mile delivery of bulky items, especially furniture. Final Mile Services is included in the segment, and Roberts highlighted the business in his presentation after the shareholders meeting Thursday. Cory comprises 26.5% of the business, the pool distribution service comprises 22.6% and the appliance business, 40.6%, according to the presentation.
Roberts also discussed the carrier’s $500 million investment into technology announced at the 2017 shareholders meeting, and the growth of freight matching software Marketplace within the J.B. Hunt 360 technology platform. Revenue attributed to Marketplace has risen 93.8% to $186 million in the first quarter of 2019, from $96 in the same period in 2018. The number of trucks serving loads within Marketplace has risen 58.8% to 585,400 in the first quarter of 2019, from 368,600 in the same period in 2018.
“Technology is moving faster than ever before,” said Roberts, before wrapping up the almost 30-minute shareholders meeting.
Also Thursday, J.B. Hunt announced it will pay a 26-cents per share cash dividend on May 17 to shareholders of record as of May 3. This is the second consecutive quarter the company has paid a 26-cents per share dividend. The company had paid a 24-cents per share dividend before the previous quarter.
J.B. Hunt has nearly 28,000 employees.