Neutral Stance on J.B. Hunt - Analyst Blog
06 Febbraio 2014 - 1:30AM
Zacks
On Feb 3, 2014 we maintained our Neutral recommendation on
J.B. Hunt Transport Services Inc. (JBHT) based on
enhanced equipment velocity, accelerated fleet conversion and
geographic expansion. The transportation service provider holds a
Zacks Rank #3 (Hold).
Why Kept Neutral?
Two of the company’s segments – Intermodal and Dedicated
Contract Services (DCS) that contributed more than 85% to the total
revenue in 2013 – are well poised for growth with strong market
fundamentals. For the coming months, the company expects 10–14%
intermodal volume growth as market fundamentals here will be
stronger than trucking. J. B. Hunt expects the major chunk of
volume growth to come from new contracts awarded due to the ongoing
highway-to-intermodal conversion and a small part to be contributed
by its existing customers.
DCS business continues to provide additional growth
opportunities as it expands its footprint into a unique local
delivery business, benefiting from the uptrend in e-commerce. J. B.
Hunt is focusing on the high-priced business to reach its 2014
revenue growth target.
Meanwhile, with respect to the Integrated Capacity Solutions
(ICS) segment, higher demand from customers, opening of new
branches and technological investments will boost the company’s
growth going forward. The company expects 18–20% revenue growth
from the ICS segment in 2014.
Despite such positives, management believes that revenue per
load growth for 2014 will be restricted and could decline in the
first quarter due to weather-related costs. Persistence of high
competition within ICS remains the primary reason for the company’s
expectation of an operating margin decline in 2014.
Moreover, J.B. Hunt’s trucking segment is continuously being
affected by the ongoing truck to rail conversion. Although
transformation of the segment has started we believe a turnaround
will take quite some time to materialize. Further, higher driver
wages, firmness in contractual pricing and continued focus on
investments can temper J.B. Hunts’ margin.
Other Stocks to Consider
Sector stocks likely to perform impressively in the coming
months include Trinity Industries Inc. (PATR),
Covenant Transportation Group Inc. (CVTI) and
American Railcar Industries Inc. (ARII). TRN and
CVTI currently carry a Zacks Rank #1 (Strong Buy) while ARII
carries a Zacks Rank #2 (Buy).
AMER RAILCAR (ARII): Free Stock Analysis Report
COVENANT TRANS (CVTI): Free Stock Analysis Report
HUNT (JB) TRANS (JBHT): Free Stock Analysis Report
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