Dividends, Buyback Aid J.B. Hunt (JBHT), Interest Expense High

J.B. Hunt Transport Services, Inc.’s JBHT consistent efforts to reward its shareholders through dividend payments and share repurchases look encouraging. Concurrent with the fourth quarter of 2023 earnings release, JBHT’s board of directors approved a dividend hike of 2%, thereby raising its quarterly cash dividend to 43 cents from 42 cents per share. The raised dividend was paid on Feb 23, 2024, to all its shareholders of record as of Feb 9. The move reflects JBHT’s intention to utilize free cash to enhance its shareholders’ returns.

The company is also active on the buyback front, having resumed the same in the fourth quarter of 2020 after a temporary pause amid coronavirus concerns. In the fourth quarter of 2023, JBHT purchased almost 137,000 shares for $25 million. As of Dec 31, 2023, JBHT had approximately $392 million remaining under its share repurchase authorization.

Declining operating expenses due to lower fuel costs, purchased transportation costs, and salaries, wages and benefits expenses have the potential to boost J.B. Hunt's bottom line. In 2023, operating expenses fell 12.2% year over year.

On the flip side, J.B. Hunt’s top line continues to grapple with lower revenues across all the business segments, mainly due to a combination of lower volume and customer rates. JBHT’s fourth-quarter 2023 revenues of $3,303.70 million surpassed the Zacks Consensus Estimate of $3,236.2 million but fell 9.5% year over year. Total operating revenues, excluding fuel surcharge revenues, fell 6% year over year. The downfall was due to a 12% and 7% decline in volume in Integrated Capacity Solutions (ICS) and Truckload (JBT), respectively, a 10% and 13% decline in revenue per load, excluding fuel surcharge revenue in Intermodal (JBI) and JBT, respectively, and a 12% decline in stops in Final Mile Services (FMS). These were partially offset by a 6% increase in volume in JBI, a 3% increase in productivity (revenue per truck per week excluding fuel surcharge revenue) in Dedicated Contract Services (DCS), and the revenue contribution from the acquisition of the brokerage assets of BNSF Logistics.

Higher net interest expense is likely to mar J.B. Hunt’s bottom line. JBHT continues to incur higher interest expenses owing to higher interest rates and debt issuance costs. Net interest expense for 2023 increased 16.2% year over year due to higher effective interest rates.

J.B. Hunt’s weak cash position is worrisome. JBHT's cash and cash equivalents were $53.34 million at the end of the fourth quarter of 2023, much lower than the long-term debt of $1,326.10 million.

Partly due to these headwinds, shares of JBHT, despite gaining 12.6%, have underperformed its industry’s growth of 31.5% in the past year.

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Zacks Rank and Stocks to Consider

Currently, JBHT carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Zacks Transportation sector are GATX Corporation GATX, SkyWest, Inc. SKYW and Copa Holdings, S.A. CPA. Each stock presently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GATX has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the last four quarters (missing the mark in the remaining one). The average beat is 16.47%.

The Zacks Consensus Estimate for 2024 earnings has been revised 6.1% upward over the past 90 days. GATX has an expected earnings growth rate of 3.68% for 2024. Shares of GATX have gained 13.9% in the past year.

SkyWest's fleet-modernization efforts are commendable. The Zacks Consensus Estimate for SKYW’s 2024 earnings has improved 11.1% over the past 90 days. Shares of SKYW have surged 222.2% in the past year.

SKYW has an expected earnings growth rate of more than 100% for 2024. SKYW delivered a trailing four-quarter earnings surprise of 128.02%, on average.

CPA has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the last four quarters (missing the mark in the remaining one). The average beat is 18.02%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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