Morningstar

J.B. Hunt's Third-Quarter Revenue Mostly In Line

Higher costs and soft contract rates temper margins, and we view shares as overvalued today.

Securities In This Article
JB Hunt Transport Services Inc
(JBHT)

Narrow-moat intermodal specialist

Profitability came in modestly below our expectations, partly because of transaction costs from the tuck-in Special Logistics Dedicated deal and network disruption from the Southeast hurricanes. Additionally, the firm continues to see fallout from lingering soft contractual pricing across its intermodal, for-hire truckload, and truck brokerage operations linked to abundant truckload capacity since early 2016. On the positive side, capacity is showing signs of firming due in part to large carriers’ fleet reductions this past year. Also, the influx of trucks to Southeast freight lanes (driven by higher-priced hurricane-related cargo opportunities) has further tightened supply; in fact, spot rates have risen dramatically in recent months. We expect Hunt to see solid profitability gains in 2018 as operating conditions improve. We haven’t materially altered our longer-term revenue and margin assumptions, but we have increased our fair value estimate to $85 per share from $84 on the time value of money since our previous update. The shares are trading in overvalued territory.

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About the Author

Matthew Young, CFA

Senior Equity Analyst
More from Author

Matthew Young, CFA, is a senior equity analyst, AM Industrials, for Morningstar*. He covers transportation and logistics firms. Young is responsible for conducting in-depth fundamental research and valuation analysis, while generating investment recommendations and value-added insights for institutional buy-side and advisory clients. Key coverage sectors include the Class-I railroads, integrated parcel delivery (FedEx, UPS), trucking, and asset-light freight forwarding (C.H. Robinson, Expeditors International). Young has also covered companies across the commercial services, waste management, and financial services industries.

Before joining Morningstar in 2010, Young spent five years as an equity research associate at William Blair, where he covered logistics and commercial-services firms. In this position, he was responsible for conducting fundamental analysis, valuation modelling, and writing earnings notes and ad hoc reports.

Young holds a master’s degree in business administration, with concentrations in finance and accounting, from the University of Chicago Booth School of Business. He also holds the Chartered Financial Analyst® designation. Young holds a bachelor’s degree in psychology and communications from Wheaton College.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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