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Here's Why J.B. Hunt Transport Services Climbed 15% in January

By Lou Whiteman – Updated Apr 22, 2019 at 5:14PM

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A strong earnings report outweighed concerns about the global economy and questions about pricing power.

What happened

J.B. Hunt Transport Services (JBHT 3.59%) hit the gas in January, with shares rising by 15%, according to data provided by S&P Global Market Intelligence. The company reported better-than-expected fourth-quarter results and boosted its dividend, leading shares to reverse a December slide.

So what

J.B. Hunt reported fourth-quarter earnings of $0.81 per share, down nearly 20% year over year but ahead of Wall Street's $0.74-per-share consensus estimate. Excluding expenses related to ongoing arbitration proceedings with Berkshire Hathaway-owned BNSF Railway, J.B. Hunt earned $1.70 per share, well above the $1.48 estimate.

Revenue increased 16% year over year to $2.32 billion, ahead of the $2.3 billion consensus. The company also raised its quarterly dividend by 8.3% to $0.26 per share, its 14th consecutive annual hike.

Check out the latest J.B. Hunt earnings call transcript.

A truck driver smiles from the window of his cab.

Image source: Getty Images.

The company in January also spent $100 million to acquire Cory 1st Choice Home Delivery, expanding its ability to deliver furniture and other bulky items to homes and offices. Company officials on a conference call following the earnings release said the acquisition of Cory positions J.B. Hunt to take a major share in a delivery segment that accounts for about $5 billion in total spending annually nationwide.

Now what

The 15% gain in January followed a 12.5% decline in December, as investor concerns about a slowing global economy and the impact of trade wars put pressure on stocks in general and the transport sector in particular. Even after January's recovery, there are still reasons for concern.

The industry is in the early stages of its annual process of renegotiating contract rates with major customers, and there is evidence to suggest that after years of increased freight traffic and higher rates, big gains might be harder to come by this time around. North American trucking companies ordered a record number of new trucks in 2018 that in 2019 must be put to use, which could put pressure on pricing.

There is also a fear that large companies pulled shipments forward in 2018 to get ahead of potential tariffs and the extended Chinese work stoppage during the country's New Year celebration, factors that could create an inventory glut in early 2019 that would eat into demand for shipping services.

J.B. Hunt is a solid operator and a survivor in the cutthroat trucking industry, but at this moment there are better opportunities among transport companies. I'd leave J.B. Hunt in neutral.

Lou Whiteman owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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Stocks Mentioned

J.B. Hunt Transport Services, Inc. Stock Quote
J.B. Hunt Transport Services, Inc.
JBHT
$162.03 (3.59%) $5.61
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$413,300.00 (1.68%) $6,830.00
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$272.80 (2.17%) $5.78

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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