J.B. Hunt Transport Services(JBHT), the third-largest U.S. truckload carrier, reported first quarter 2011 earnings of 40 cents per share, surpassing the Zacks Consensus Estimate of 38 cents. Earnings per share rose 37.9% from the year-ago earnings of 29 cents.
Total revenue increased 18.5% year over year to $1,000.8 million, handily beating the Zacks Consensus Estimate of $961 million. The growth in revenues was aided by higher shipments in each of the segments. Operating income leaped 33.2% year over year to $89.8 million attributable to strong profits across all businesses.
Segment Results
Intermodal reported revenue of $576.9 million, up 23% year over year, based on higher load count and fuel surcharges. Capacity constrains in the truck market aided pricing growth by 4%. The average tractor count increased to 2,702 from 2,372 in the year-ago quarter. Operating income climbed 32% year over year to $62.6 million.
Dedicated Contract Services revenues grew 15% year over year to $238.5 million driven by strong growth in delivery and replenishment channels. However, revenue per truck per week (productivity) remained lackluster with a 1% uptick due to harsh weather conditions in the first half of the quarter. The average truck count increased 6.6% to 4,652. Operating income grew a modest 1% from the year-earlier quarter to $18.6 million due to customer bankruptcy of $1.6 million it faced during the quarter.
Truck revenues climbed 6% year over year to $119 million despite a 10.8% reduction in tractors. At the end of the first quarter, the tractor count decreased to 2,497 from 2,831 in the year-ago quarter. Overall, rates continued to improve with a 4% year over year growth registered in the quarter. Moreover, the average length of haul upped 3.7%. Operating income increased to a robust $5.8 million from $0.6 million in the year-ago quarter.
Integrated Capacity Solutions revenues climbed 22% year over year to $74.7 million attributable to a 10.6% increase in load volume and higher pricing in both contractual and transactional businesses. Operating income shot up 126% to $2.6 million from $1.1 million in the year-ago quarter. On a year-over-year basis, the carrier base rose 14% and employee count remained flat.
Liquidity
At the end of March 31, 2011, cash and cash equivalents of J.B. Hunt plunged to $5.4 million from $7.7 million during the comparable quarter prior year. Total debt increased to $698.2 million from $541.0 million at the end of the year-ago quarter.
Capital expenditure was $112.0 million for first quarter 2011 compared with $48 million in first quarter 2010.
J.B. Hunt repurchased 1.3 million shares at a total cost of $55 million in the reported quarter. The company has $194 million remaining in the share repurchase authorization.
Our Analysis
We believe J.B. Hunt continues to gain market share across all segments. The company remains focused on Intermodal growth by expanding services in Mexico and is looking forward to new market opportunities in the Eastern Network. Additionally, selling Intermodal services through Integrated Capacity Solutions business is expected to increase access to smaller customers.
However, the company faces intense competition from other truckload carriers such as YRC Worldwide Inc. (YRCW), Old Dominion Freight Line Inc. (ODFL) and Conway Inc. (CNW) due to its low barriers to entry. In addition, rapidly rising fuel costs, tightening of capacity in the Truck market amid truck load conversion to rail intermodal may negatively impact the company’s performance ahead.
Consequently, we are maintaining our long-term Neutral recommendation on J.B. Huntwith a Zacks Rank # 3 (Hold).
CON-WAY INC (CNW): Free Stock Analysis Report
HUNT (JB) TRANS (JBHT): Free Stock Analysis Report
OLD DOMINION FL (ODFL): Free Stock Analysis Report
YRC WORLDWD INC (YRCW): Free Stock Analysis Report
Zacks Investment Research
