J.B. Hunt Transport Services, Inc.’s JBHT have had a good time on the bourses of late, improving in double-digits over the past six months. Despite reporting encouraging price performance, JBHT underperformed its industry in the said time frame. JBHT’s price performance compares unfavorably with that of other industry player like Knight-Swift Transportation Holdings Inc. (KNX) but favorably with Landstar System, Inc. (LSTR) in the same timeframe.

Six-Month Price Comparison

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Let’s delve deeper to find out what should investors do now with JBHT stock.

Factors Working in Favor of JBHT Stock

We are impressed by the company’s efforts to reward its shareholders through dividend payments and share repurchases. With the quarterly dividend of 43 cents per share (annualized $1.72 cents per share), JBHT's dividend yield is currently pegged at 0.95%. 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 third quarter of 2024, JBHT purchased almost 1,200,000 shares for $200 million. As of Sept. 30, 2024, JBHT had approximately $967 million remaining under its share repurchase authorization. Consistent shareholder-friendly initiatives instill investor confidence and positively impact J.B. Hunt's bottom line.

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. During 2023, operating expenses fell 12.2% year over year. During the first nine months of 2024, operating expenses declined 4.8% year over year.

Segmental Weakness & Higher Interest Expense: Major Woes

J.B. Hunt's top line continues to grapple with weakness across most of its business segments. JBHT reported third-quarter 2024 revenues of $3.07 billion, which surpassed the Zacks Consensus Estimate of $3.04 billion but fell 3% year over year. The downfall was owing to a 5% and 6% decrease in gross revenue per load in Intermodal (JBI) and Truckload (JBT), respectively, a decline in load volume of 10% and 6% in Integrated Capacity Solutions (ICS) and Dedicated Contract Services (DCS), respectively, and 6% fewer stops in Final Mile Services (FMS). These were partially offset by JBI load growth of 5%, which included growth in both the transcontinental and eastern networks and a 3% increase in revenue per load in ICS. Total operating revenue, excluding fuel surcharge revenue, decreased less than 1% from the year-ago reported quarter.

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 2022 and 2023 increased 9.7% and 16.2% year over year, respectively. Net interest expense for the first nine months of 2024 increased 34.8% year over year due to higher effective interest rates and consolidated debt balance, partially offset by higher interest income.

J.B. Hunt’s weak cash position is worrisome. JBHT's cash and cash equivalents were $120 million at the end of the third quarter of 2024, much lower than the long-term debt of $1.03 billion. This implies that the company does not have sufficient cash to meet its debt obligations.

Long-Term Debt to Capitalization

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Given these headwinds surrounding the stock, earnings estimates have been southbound, as shown below.

Image Source: Zacks Investment Research

To Conclude

It is understood that decline in operating expenses and consistent shareholder-friendly initiatives bode well for J.B. Hunt’s bottom line. However, given the headwinds mentioned in the write-up, we do not advise buying this Zacks Rank #3 (Hold) stock at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Instead, they should monitor the company’s developments closely for a more appropriate entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank supports our thesis.

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J.B. Hunt Transport Services, Inc. (JBHT) : Free Stock Analysis Report

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