Diversification and a reasonably strong economy continue to pay off for transportation company J.B. Hunt
Overall, J.B. Hunt's revenue grew more than 11% in the third quarter. Stripping out those fuel surcharges, the intermodal business grew 8%, while the trucking and dedicated business each grew about 3%. Operating efficiency declined slightly and net income rose 16% for the period -- both of those numbers exclude the impact of an arbitration settlement with intermodal partner Burlington Northern Santa Fe
The intermodal business continues to benefit as some customers look to shift business away from highway freight to rail freight. For this quarter, volume in J.B. Hunt's intermodal business grew 3% to go along with a better than 4% increase in revenue per mile. With a lot of the business here coming in conjunction with Burlington and NorfolkSouthern
In the trucking space, rates are still strong and J.B. Hunt is also experiencing modest increases in length of haul. On the other hand, fuel surcharges have been lagging fuel price increases (not uncommon in times of rapidly rising prices), and the company believes driver supply is an issue with respect to expanding capacity. Within the dedicated business, top-line growth was modest, but operating performance did improve.
At the risk of stating the obvious, this business is economically sensitive, and if high energy prices or higher interest rates or both cut into consumer demand and manufacturing activity, there will be less demand for these services. Consider, for instance, the fact that the company gets about 15% of its business from Wal-Mart
I'm also mildly concerned about the company's $10 million gift to the University of Arkansas. I understand that this is an Arkansas-based company, but I tend to believe charity is best left at home. If the company executives and board of directors wanted to give a donation, they should have pulled out their personal checkbooks instead of the corporate checkbook.
But that is really a minor quibble with what I otherwise think is a pretty solidly run trucking company. I usually don't bother deluding myself with economic projections or predictions, but I'm thinking today's price for this company is probably pretty fair, especially with ongoing concerns about energy prices and the immediate future of the economy.
For more Takes for the road:
- FedEx's Strange Delivery
- FedEx Delivers the Goods
- Arkansas Best for the Long Haul?
- J.B. Hunt Keeps on Trucking
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).