Year to date, shares of intermodal carrier JB Hunt (JBHT) are up 11%. But can this stock keep on trucking?
JB Hunt reports third-quarter results next Monday, Oct. 17, before the market open. While the shares are up so far this year, the big move came months ago when the stock jumped from the mid-$60s to the $80s. Now it seem like the stock can't get out of gear.
Most of the big move came in the first quarter, when the company posted revenue growth of 6.1% versus 2.4% the year before. First-quarter revenue was $1.53 billion. That quarter was driven by strong intermodal growth, up 6.1%.
The second quarter seemed to keep the momentum alive. The company reported that revenue grew 4.9%. Again, intermodal transport was the star of the day, with revenue increasing 3.2% to $933.4 million. The company's "dedicated" transport revenue was also picking up, growing 4.4%. JB Hunt calls specially designed trucks, such as chemical transport trucks, dedicated.
But it seems business since has stalled out and so has the stock. Analysts are looking for third-quarter revenue of $1.64 billion, up 3.7%, and earnings of 98 cents per share.
Truck transport revenue is forecast to fall to 3.4%. The truckload business has been hit by lower rates per mile, increased driver hiring costs, higher independent contractor costs and increased maintenance costs. In 2014, revenue per tractor per week was $4,068. But the business has turned down since then. Last quarter, revenue per tractor was just $3,419, or 16% lower than in 2014. The average number of nonpaid empty miles per load rose to 87.2, up 9.9% year over year.
Intermodal revenue is forecast to climb 3% to $978 million.
Third-quarter operating expense is expected to weigh down results. Expenses could be up almost 5%, mostly because of higher wages. Wages make up 28% of expenses.
In the first quarter, earnings grew 12.5%, but third-quarter earnings are expected to be down 1.5%. And that's the problem. Earnings growth has slowed dramatically. Unless growth can pick up next year, I don't think the stock can keep trucking higher.
Fiscal 2017 estimates look too high. Analysts think revenue will climb between 8% and 9% next year and earnings magically will grow 12%. That's seems pretty unrealistic. The company will be lucky to grow revenue 5% this year. In 2014, revenue was flat.
After the company reports third-quarter results, analysts are going to need to go back to their spreadsheets and reduce their estimates. I would avoid shares of JB Hunt until the company can restart its earnings growth.
