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J.B. Hunt Stock Plunged ~5% after Q1 Earnings Missed Estimates

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Earnings missed expectations

J.B. Hunt Transport Services (JBHT) stock plunged ~5% in the extended trading session on April 15 after the company reported lower-than-expected first-quarter 2019 results. Although the company’s top and bottom line results marked YoY improvement, they came in way below Wall Street analysts’ forecasts.

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J.B. Hunt reported EPS of $1.09, which fell short of analysts’ expectations of $1.26. Furthermore, the company’s earnings growth rate trend drastically declined from the last four quarters. During the first quarter, J.B. Hunt’s EPS grew just 1.9% YoY, while EPS had registered double-digit growth in all the four quarters of 2018. Lower revenue growth, higher operating costs, reduced productivity due to winter weather, and increased interest expenses led to this dismal bottom-line performance.

Quarter in detail

The first-quarter revenues came in at $2.09 billion, lower than analysts’ estimate of $2.21 billion. However, the quarterly revenues grew 7.3% YoY mainly due to an 11% increase in revenue per load, partially offset by a 7% decline in volumes.

J.B. Hunt reported operating income of $168 million, which was almost flat compared to the year-ago quarter’s operating income of $169 million. The dismal YoY operating profit results were mainly due to a rise in driver wages, an increase in rail purchase transportation costs, lower intermodal network utilization, reduced productivity due to bad weather, higher salary and wage expenses for non-driving personnel, and increased spending on technology upgrades.

During the quarter, the company paid 43% higher interest compared to the same period in 2018 due to higher debt levels and a rise in effective interest rates.

Nonetheless, J.B. Hunt’s bottom-line results slightly benefited from reduced tax expenses. The effective tax rate came in at 22.7% compared with 26% in the first quarter of 2018. For 2019, the company anticipates the effective tax rate to be at 24%.

Peers’ expectations

J.B. Hunt is the first transportation (IYT) stock to report first-quarter results. The majority of its peers will report first-quarter results in the coming weeks. Analysts project Hub Group (HUBG) and C.H. Robinson Worldwide (CHRW) to post YoY Q1 EPS growth of 12.4% and 13.2%, respectively. XPO Logistics (XPO) is anticipated to report a 30.6% YoY decline in its first-quarter EPS.

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