Why Analysts Are Divided on J.B. Hunt Transport before Its 2Q17 Earnings
In this final part of our J.B. Hunt Transport Services (JBHT) 2Q17 pre-earnings series, we’ll turn to analysts for their recommendations on the company. JBHT has a mean recommendation of ~2.2, indicating a “buy” from Reuter-surveyed analysts.
Out of 22 analysts, five analysts (22.7%) gave a “strong buy” recommendation on JBHT stock. Seven analysts (31.8%) gave a “buy” recommendation, and ten analysts (45.4%) gave a “hold” recommendation on JBHT stock. None of the analysts covering the company gave a “sell” recommendation on its stock.
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Peer group recommendations
Among JBHT’s peers, 90.0% of analysts gave Landstar System (LSTR) “strong buy” and “buy” recommendations. LSTR has “hold” recommendations from the remaining analysts (10.0%).
Werner Enterprises (WERN) has 89.0% “hold” recommendations from analysts, and the remaining analysts (11.0%) are divided equally with “buy” and “sell” opinions on WERN stock.
Nearly 42.0% analysts gave Raider System (R) “strong buy” and “buy” recommendations. The remaining analysts (58.0%) gave “hold” recommendations.
Swift Transportation (SWFT), which announced a merger with Knight Transportation (KNX) earlier this year, has ~62.5% of these analysts suggesting a “strong buy” and “buy.” The remaining 37.5% of the surveyed analysts gave a “hold” recommendation on SWFT.
Why analysts seem to be divided on JBHT
J.B. Hunt Transport (JBHT) is a leader in the trucking industry, utilizing technology to improve its business and customer solutions. JBHT operates one of the largest 100% 53-foot-high cube container fleets in the United States. Plus, it operates the largest drayage fleet in North America.
JBHT’s new contracts are expected to start in the second half of 2017. About 40%–50% of the company’s contracts have an automatic inflation clause. As a result, JBHT isn’t required to conduct repricing negotiations. With sluggish growth in the truckload rate market, long-term contracts with inflationary clauses are important factors for the company. JBHT has an evergreen contract with BNSF Railway (BRK-B), which ensures “most favored” status for the company with the railway.
The stock buyback activity should also grow JBHT’s EPS in the coming quarters. In terms of revenue growth, analysts expect JBHT to surpass its peers over the next four quarters. However, these analysts seem to be skeptical about the accretion in the company’s EPS in the near term.
Investors who seek indirect exposure to transportation stocks can opt for the iShares Dow Jones Transportation Average ETF (IYT). This ETF has substantial holdings in trucking companies.