J.B. Hunt Transport Services
(
JBHT
) reported fourth quarter 2011 adjusted earnings of 59 cents per
share, which surpassed the Zacks Consensus Estimate by a penny.
Earnings per share increased 28.3% from 46 cents a year ago on
strong growth across most segments. The current growth trend in
freight rates arising from tighter truckload market; coupled with
growing demand for intermodal and higher fuel surcharges continued
to support the company's earnings throughout 2011.
Adjusted earnings for the quarter exclude the negative impact of
$3.9 million (or 2 cents per diluted share) related to executive
retirees and charitable contributions.
Adjusted earnings for fiscal 2011 were $2.11, up 35.3% year over
year.
Total revenue for the quarter climbed 18% year over year to $1.2
billion, in line with the Zacks Consensus Estimate. The
year-over-year growth was aided by higher shipments across all
segments. Revenues for the year grew 19% to $4.5 billion.
Quarterly operating income increased 26% year over year to $122
million, driven by higher volumes and cost improvements. Operating
ratio improved 60 basis points (bps) to 89.9% year over year.
Operating income for the full year was $444 million, up 28% on the
back of 60 bps improvements in operating ratio to 90.2%.
Segment Results
Intermodal
reported revenue of $729 million, up 24.0% year over year, driven
by a 17% rise in load count. Higher fuel surcharges along with 4.6%
higher freight rates and capacity constrains, particularly in the
Southeast truck market, aided revenue growth in this segment. The
average tractor count increased to 3,109 from 2,665 in the year-ago
quarter. Operating income climbed 20% year over year to $83.9
million.
Dedicated Contract Services
revenues grew 9% year over year to $260.0 million on higher truck
count due to new contracts. The average truck count was 4,915 as
against 4,573 in the year ago quarter. Operating income shot up
40.0% from the year-earlier quarter to $27.4 million on cost
control, particularly reductions in insurance and claims costs,
increased truck count and higher productivity arising from the
transfer of assets into more profitable business units.
Truck
revenues climbed 8.0% year over year to $128 million despite a 4.0%
reduction in tractors. The average tractor count decreased to 2,597
from 2,707 in the year-ago quarter. Overall, the rates continued to
improve and registered a 4.1% year-over-year growth in the quarter.
The average length of haul increased 6.6%. Operating income surged
61% year over year to $7.1 million.
Integrated Capacity Solutions
revenues grew 19.0% year over year to $99 million primarily on
higher pricing in both contractual and transactional businesses as
well as an increase in fuel surcharges. Volumes registered a modest
growth of 4% in the quarter Operating income spiked 25% year over
year to $4.1 million. On a year-over-year basis, the carrier base
rose 12.5% and employee count grew 16.7%.
Liquidity
At the end of December 30, 2011, cash and cash equivalents of
J.B. Hunt decreased to $5.4 million from $7.7 million in 2010.
Total debt increased to $749 million from $654.0 million in the
year-ago period.
Capital expenditure almost doubled to $446 million at the end of
December 31, compared with $226 million in 2010 due to intermodal
upgrades and purchase of equipments.
Share Repurchase
In fiscal 2011, J.B. Hunt repurchased 6 million shares for a
total cost of $246 million. The company also initiated a new share
repurchase program of $500 million in the fourth quarter. As of
December 31, 2011, the company had $503 million remaining in its
share repurchase authorization.
Our Analysis
We believe J.B. Hunt continues to gain market share across all
segments, particularly in Intermodal, Dedicated Contract Services
and Integrated Capacity Solutions that delivered record high
results. We think J.B. Hunt will benefit from the resurgence in
trade given its attractive asset-light models that generate the
most attractive returns on invested capital in the industry.
Freight rates are also expected to remain strong as a result of a
tight capacity environment. Further, J.B. Hunt is involved in the
continued contraction of the JBT business unit coupled with the
growth in the ICS business unit, the expansion of the eastern
intermodal network, and the development of new and existing
customer base.
However, the company faces intense competition from other
truckload carriers such as
YRC Worldwide Inc.
(
YRCW
),
Old Dominion Freight Line Inc.
(
ODFL
) and
Conway Inc.
(
CNW
) due to its low barriers to entry. Additionally, rapidly rising
fuel costs and tightening of capacity in the Truck market amid
truck load conversion to rail intermodal may affect the company's
performance ahead.
Consequently, we are maintaining our long-term Neutral
recommendation on J
.
B. Hunt with a Zacks Rank #3 (Hold).
CON-WAY INC (
CNW
): Free Stock Analysis Report
HUNT (JB) TRANS (
JBHT
): Free Stock Analysis Report
OLD DOMINION FL (
ODFL
): Free Stock Analysis Report
YRC WORLDWD INC (
YRCW
): Free Stock Analysis Report
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