J.B. Hunt profit, revenue expected to rise in first quarter

Lowell-based carrier J.B. Hunt Transport Services Inc. is projected to post earnings increased by more than 25% and revenue rose nearly 10% in the first quarter.

After the markets close April 15, J.B. Hunt is expected to report first-quarter earnings increased to $1.23 per share, from 98 cents per share in the same period last year, based on a consensus of 22 analysts. Revenue is projected to rise by 9.2% to $2.49 billion.

In an earnings preview, analysts Justin Long and Jack Atkins and associates George Sellers and Wade Schaller, all of Little Rock-based Stephens Inc., said the focus of the company’s earnings release will be on the outlook for the remainder of 2021 as it previously noted an operating income impact of between $15 million and $20 million because of the severe winter weather. The analysts said supply and demand have remained tighter than seasonal norms since the start of the year, and “there have been incremental improvements in the intermodal pricing environment and the brokerage sector. In addition, we expected dedicated sales activity to remain at strong levels and see an increasingly favorable set-up for the ICS (Integrated Capacity Solutions) segment on the heels of the recent strategic alliance with Google.”

In February, J.B. Hunt and Sunnyvale, Calif.-based technology company Google announced an alliance to accelerate J.B. Hunt’s digital transformation and develop next-generation supply chain platform technology. The multi-year partnership is expected to expand J.B. Hunt’s technology platform J.B. Hunt 360 that digitally connects shipments with available capacity, increases efficiency and enhances the platform’s visibility.

In the carrier’s previous earnings call, company executives expected intermodal pricing to rise in the high-single-digits to low-double-digits for the bid season this year. The Stephens analysts believe the pricing is at the high end of the range amid tight supply and demand in the freight market, including strong consumer demand, West Coast port congestion and weather disruptions. They expect intermodal volume pressure in the first quarter because of tough year-over-year comparisons and capacity constraints. However, the comparisons are expected to ease, and later this year, the segment is to receive 6,000 additional containers, representing 6% of the total fleet. This should contribute to improving volumes throughout the year, they said. And in the second half of the year, the pricing on the volumes should contribute to a positive inflection in margins.

In the Dedicated Contract Services segment, strong sales activity is expected to continue. Dedicated truck sales is likely to exceed its typical target range of 800 to 1,000 units annually. In 2020, total sales were 1,331 units. In the near-term, margins are expected to be affected by startup costs and the weather, but the analysts are focused on how the strength in sales will lead to strong growth over the next two years. Contracts are typically for an average of about five years, and the retention rate is about 98%. They noted the truck driver shortage has enhanced segment value.

In the carrier’s brokerage segment, weather disruptions were a near-term tailwind. Spot market activity has remained strong and gross margins are expected to rise by 0.3 percentage points in the first quarter, from the fourth quarter. This change is typical for the first quarter, but the comparison is expected to be difficult coming off a strong end to the fourth quarter, the analysts said. The brokerage segment is expected to have a slight operating profit in the first quarter.

“But more importantly, as we’ve highlighted in recent notes, we think the trajectory of (J.B. Hunt 360) is improving on the heels of the recent strategic alliance with Google,” they added. “While details around this alliance remain somewhat limited, we expect to see the benefits materialize later this year and into 2022.”

The Stephens analysts have an overweight (buy) rating on J.B. Hunt shares and increased its 12-month target price on the stock by $5 to $180.

Shares of J.B. Hunt (NASDAQ: JBHT) closed Thursday (April 8) at $167.61, down $1.70, or 1%. In the past 52 weeks, the stock has ranged between $173.04 and $94.38.