J.B. Hunt Transport (JBHT) operates one of the largest, 53′ high-cube container fleets in the United States. The company also runs the largest drayage fleet in North America. Though JBHT missed its 3Q16 earnings estimate, it surpassed its revenue estimate.
Analysts’ recommendations haven’t changed after the company’s 3Q16 results. It has a consensus rating of 4.1. Fourteen analysts, or 58%, are in favor of “buys” on JBHT, while the remaining ten, or 42%, have “hold” opinions on the stock.
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Among JBHT’s peers, Werner Enterprises (WERN) and Heartland Express (HTLD) have the fewest “buy” recommendations. Only one out of 13 analysts has a “buy” opinion on HTLD. HTLD recorded revenue and earnings growth of -18% and -26%, respectively, in 2Q16.
Eleven out of 18 analysts have “buy” recommendations on Swift Transportation’s (SWFT) stock. After JBHT, Swift has the highest return on equity among the companies under discussion. Knight Transportation (KNX) has two out of 19 analysts with “buy” recommendations.
Investors interested in transportation stocks can opt for the SPDR S&P Transportation ETF (XTN). Major US trucking and railroad companies make up 23.4% and 13.8% of the portfolio holdings of XTN, respectively.
The present economic climate should support volume growth for trucking players. JBHT, being the front-runner among them, should be the first to benefit from this support. However, the sluggish industrial economy could impact LTL (less-than-truckload) players first, followed by the full truckload market.
Here, the long-term contracts of trucking companies come into the picture. JBHT has an evergreen contract with BNSF Railway (BRK-B). The contract ensures a “most favored” status for JBHT with the company.
Given JBHT’s unique position in the transportation industry, it enjoys a huge client base. According to Bloomberg, about 58% of the company’s top 50 clients use three of its four segments. That number slides to 24% when looking at the company’s total customer base.
J.B. Hunt Transport Services has been systematically reducing its debt burden. With its stock buyback in force, the base for its earnings per share should contract further in the coming quarters, resulting in its stock marching upward.