J.B. Hunt quarterly income up 10.7%, but numbers miss Wall Street targets

J.B. Hunt Transport Services posted second quarter net income of $103.419 million, better than the $93.408 million in the second quarter of 2014, but below market expectations on a per share basis. The quarterly income gain continues the trend from a solid 2014 and a 34% net income boost in the first quarter of 2015.

Total revenue during the quarter was $1.539 billion, just below the $1.547 billion in the second quarter of 2014.

Per share net income of 88 cents was below the consensus analyst estimate of 90 cents, and the revenue missed the estimate target of $1.61 billion. There are 22 equity market analysts who cover J.B. Hunt.

“Customer rate increases across all business units, load growth of 2% in Intermodal (JBI), a 6% increase in revenue producing trucks in Dedicated Contract Services (DCS) and load growth of 12% in Integrated Capacity Solutions (ICS) could not offset the decrease in fuel surcharge revenue, sluggish consumer freight demand and lower equipment utilization in our Truck (JBT) business segment resulting in flat consolidated revenue compared to prior year,” the company noted in the earnings report released Friday before the markets opened.

The company also said income was hurt by a $14.1 million charge for “corporate wide streamlining and technology redevelopment costs.” Benefits from the effort should be realized in the next two fiscal years, the company said.

During the second quarter, the company was added to the prestigious S&P 500 Index, a closely watched financial indicator in the equity markets.

SEGMENT PERFORMANCE
• Intermodal (JBI)
Second quarter 2015 segment revenue: $905 million, down 3%
Second quarter 2015 operating income: $118.6 million, up 5%

The company said topline performance in this segment was hurt by “lingering effects of disruptive shipping patterns due to the west coast port issue,” slow rail service recovery and reduced consumer activity that resulted in reduced freight demand.

• Dedicated Contract Services (DCS)
Second quarter 2015 segment revenue: $367 million, up 5%
Second quarter 2015 operating income: $40.6 million, up 34%

The company added 413 “revenue producing trucks” in the quarter, which helped boost revenue and income. The company also is able to push higher rates without losing business.

“Customer retention rates remain above 96% as value driven services continue to support necessary rate increases,” noted the earnings report.

• Integrated Capacity Solutions (ICS)
Second quarter 2015 segment revenue: $174 million, up 0.6%
Second quarter 2015 operating income: $4.9 million, down 21%

The company saw higher personnel costs in the quarter as a result of increasings its ICS branch offices from 26 to 31 quarter-over-quarter.

• Truck (JBT)
Second quarter 2015 segment revenue: $98 million, down 3.5%
Second quarter 2015 operating income: $9.7 million, up 3%

The company said improved revenue from higher freight rates, more trucks, fuel savings, and lower maintenance costs was hit with increased driver pay and a $2.6 million reduction in equipment sales.

IMPROVING DEMAND TRENDS
For the first half of 2015, the company has recorded net income of $195.351 million, up a healthy 20.5% compared to the $162.071 billion in the same period of 2014. Revenue for the first six months of 2015 reached $2.98 billion, better than the $2.954 billion during the first half of 2014.

Brad Delco, a transportation industry analyst with Little Rock-based Stephens Inc., estimated the company would hit 87 cents per share on $1.59 billion in sales.

“We think JBHT will see some pressure on intermodal volumes this quarter because of weaker demand for transcontinental moves from the West Coast ports. That said, we think strong pricing and margin performance will offset the volume shortfall,” Delco said in a note prior to the Hunt earnings release.

For the remainder of 2015, Delco sees a good market for J.B. Hunt.

“Looking ahead we also expect to see accelerating demand trends in the second half of the year as the port issues subside,” Delco wrote.

First quarter net income for the Lowell-based transportation company hit $91.932 million, up 34% compared to the same quarter in 2014. Consolidated revenue increased 2.4% to $1.44 billion in the first quarter. In 2014, J.B. Hunt Transport Services boosted its revenue to $6.165 billion, a 10.4% increase over fiscal 2013. Net income for the year was $374.792 million, up 9.46% compared to the 2013 period.

Shares of J.B. Hunt (NASDAQ: JBHT) closed Thursday at $84.60 and were set to open Friday morning at $84.88. During the past 52 weeks the share price has ranged from a $93.50 high to a $71 low.