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J.B. Hunt: Intermodal & DCS to Drive Growth amid Headwinds

On Mar 15, we issued an updated research report on J.B. Hunt Transport Services Inc.JBHT . The company's Intermodal and DCS segments witnessed a growth in annual revenues mainly buoyed by the addition of new customers and rate increase.

J.B. Hunt reported mixed financial results in the fourth quarter of 2015 with the bottom line beating the Zacks Consensus Estimate and the top line missing the same.

We believe J.B. Hunt is poised to benefit from the revival in trade given its asset-light (or even non-asset) model that generates attractive returns on invested capital. The company has transformed itself to an asset-light transportation provider from a traditional asset-based truckload carrier.

We also expect J.B. Hunt to gain from its segments - Intermodal and DCS - which accounted for over 80% of its total revenue in 2015. The company expects the major chunk of the volume growth to come from new contracts coming from the ongoing highway to intermodal conversion and a small part is likely to come from the existing customers. Both the segments witnessed a year-over-year improvement in revenues in the fourth quarter of 2015.

On the downside, J.B. Hunt competes with a range of regional and national transportation and logistics companies. The trucking industry is highly fragmented and has low barriers to entry. Despite reporting growth in revenues, operating income at the Intermodal segment fell 0.8% on an annualized basis. Moreover, the company exited the fourth quarter of 2015 with nearly $1 billion in debts against $683 million in 2014.

Moreover, volatile fuel prices have been raising caution for J.B. Hunt. In addition, stiff competition from other business models coupled with increased margin pressure may impede growth for the company going ahead.

J.B. Hunt currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Better-ranked stocks in the Internet/Application software industry include Saia, Inc. SAIA , Hawaiian Holdings, Inc. HA and China Eastern Airlines Corp. Ltd. CEA . All the three companies sport a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

HAWAIIAN HLDGS (HA): Free Stock Analysis Report

CHINA EASTN-ADR (CEA): Free Stock Analysis Report

HUNT (JB) TRANS (JBHT): Free Stock Analysis Report

SAIA INC (SAIA): Free Stock Analysis Report

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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.


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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