J.B. Hunt Transport Services ( JBHT ),
one of the largest U.S. truckload carriers, reported third quarter
2012 earnings of 65 cents per share, missing the Zacks Consensus
Estimate of 67 cents. However, earnings per share increased 14%
from 57 cents earned in the year-ago quarter on growth across most
Total revenue increased 10.6% year over year to $1.30 billion,
at par with the Zacks Consensus Estimate.
Operating income grew 12.1% year over year to $133.1 million
resulting in an operating margin of 10.3%, up 20 basis points (bps)
year over year. The year-over-year growth is attributable to volume
growth across Intermodal (JBI) and Integrated Capacity Solutions
(ICS) segments that compensated for increased expenses in the
Dedicated Contract Services (DCS) and Truck (JBT) segments.
Operating expenses increased 10.5% year over year to $1.16
billion, resulting in an operating ratio of 89.7%, down 20 bps year
Intermodal reported revenue of $794
million, up 15% year over year, driven by a 15% increase in load
count. The average tractor count increased to 3,522 from 3,057 in
the year-ago quarter. Operating income climbed 25% year over year
to $97.9 million.
Dedicated Contract Services revenues
inched up 1% year over year to $273 million in the third quarter.
The average truck count was 5,153 as against 4,917 in the year-ago
quarter. Operating income was down 14% year over year to $25.6
million due to cost incurred from new customers in the current
quarter for the past four months. In addition, higher workers'
compensation, safety and health care costs added to the operating
Truck revenues were down 8% year over
year to $117 million in the third quarter due to downsizing of
fleet by 9%. Load count also decreased 2% year over year. The
average tractor count fell to 2,406 from 2,569 in the year-ago
quarter. Rates from shippers improved and registered a
year-over-year growth of 2.6%. The average length of haul declined
Operating income was down 41% year over year to $4 million due
to lower utilization of assets, increased empty miles along with
increased employee healthcare cost, driver wages and costs relating
to independent contractors.
Integrated Capacity Solutions revenues
grew 30% year over year to $121 million attributable to a 38%
increase in load count, mostly on contractual businesses that
contributed over 64% of the shipments as opposed to 56% in the
Operating income increased 43% year over year to $5.5 million,
driven by higher operating revenues and higher productivity on
increased number of experienced workers. On a year-over-year basis,
the carrier base rose 12.0% and employee count grew 16%.
At the end of the third quarter, cash and cash equivalents
decreased to $5.7 billion from $7.7 billion at end of the third
quarter of 2011. Total debt amounted to $645 million on September
30, 2012, compared to $768 million on September 30, 2011. The
company's debt-to-equity ratio was 69.8% as of September 30, 2011,
versus 123.2% as of December 31, 2011.
Capital expenditures were $279 million in the past nine months
compared to $324 million in the comparable year-ago period.
At the end of the third quarter, the company had a total share
repurchase authorization of $503 million.
Despite falling trucking revenues on higher conversion of truck
shipments to rail intermodal, J.B. Hunt managed to have a smooth
sailing in the reported quarter based on strong business growth in
intermodal and Integrated Capacity Solutions.
However, higher operating cost with increased compensation
expenses and third party driver cost continue to weigh on revenue
growth. We believe significant growth in transportation cost
stemming from tightening of capacity in the truck market amid truck
load conversion to rail intermodal may affect the company's
Further, 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
We maintain our long-term Neutral recommendation on J
. B. Hunt. For the short term, the company holds a
Zacks Rank #3 Rank (Hold).
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