Trucking and transportation company J.B. Hunt Transport Services (JBHT -0.76%) reported earnings Oct. 15. While quarterly profits increased 15.3% over the prior year, these results still fell well short of analyst forecasts. The net earnings were short of analyst expectations despite better-than-forecast revenues, due mostly to one-time non-cash expenses.

Importantly, the company's intermodal business stabilized quarter-over-quarter after turmoil earlier in the year. Nonetheless, some margin compression and increased personnel expenses are weighing on earnings.

J.B. Hunt depends on external factors

J.B. Hunt has impressed investors with some shrewd acquisitions, and its entry to the logistics brokerage business, but the company's fortunes are still closely tied to macroeconomic trends. The company operates in a highly cyclical industry, and the Q1 2019 struggles in its largest business segment, intermodal, were caused by falling rail freight volumes, a factor over which J.B. Hunt has zero control.

A freight truck driving down the highway

Image Source: Getty Images

The stock actually held up relatively well in the last recession, falling 41.7% from May 2008 to March 2009, a period that saw the S&P sink 50.3%. Shares have gained 381% since that time, outpacing the market by 105 percentage points. That combination certainly seems beneficial for a cyclical stock, so it is easy to understand optimism around a large, mature player that is exploring new growth segments.

J.B. Stock chart

Image Source: YCharts

J.B. Hunt shares are highly correlated with industry peers, showing a correlation coefficient of 0.73 with the monthly returns of SPDR S&P Transportation ETF going back to the launch of that fund. The company's fundamentals are necessarily linked to macroeconomic trends, and the stock's performance will similarly rise and fall with the market.

Unspectacular metrics and low dividend yield

Across the board, J.B. Hunt looks very comparable to industry peers with regard to financial metrics. Return on assets, return on equity and return on invested capital are all very close to industry averages, indicating that management is adequately driving returns on the company's financial resources despite occupying a lower-margin niche. J.B. Hunt's balance sheet and leverage are comparable to peers, with no imminent threat of liquidity distress. The company has generally been well-run.

Valuation metrics tell a similar story. Price-to-book and EV/EBITDA are both nearly identical to the transportation industry average. However, J.B. Hunt shares look slightly more expensive relative to forward earnings and free cash flow, even adjusting for varying growth expectations.

Perhaps most importantly, a 0.9% dividend yield substantially yield lags the industry and wider market. We know that this cyclical stock will be hit by the next recession, even if its strong management means a negative economic event like a recession wouldn't be catastrophic for the company. However, there is no price discount or strong dividend yield leading up to that inevitable downturn. There are simply better options, with more upside potential or more downside protection, in this industry and elsewhere for exposure to those sorts of fundamentals.