J.B. Hunt earnings slip in 3Q

Trucker cites storm disruptions, rising costs to keep drivers

Graph showing information about J.B. Hunt's Third quarter
Graph showing information about J.B. Hunt's Third quarter

For the second consecutive quarter, J.B. Hunt Transport Services missed analysts' profit projections, and its stock slipped Friday after the company reported about $1.8 billion in revenue but had nearly $200 million more in expenses compared with last year.

Lowell-based J.B. Hunt finished its third quarter with a profit of $100 million, about $9 million less than in the third quarter of last year. It reported that earnings per share fell from 97 cents in last year's third quarter to 91 cents this year, lower than Stephens Inc.'s latest projections of about 95 cents per share. A consensus of 19 analysts predicted the company's investors would earn about 96 cents per share for the quarter that ended Sept. 30.

Revenue for the third quarter met expectations of a consensus estimate of 13 analysts. Revenue for the same quarter in 2016 was about $1.7 billion.

The company attributed its third-quarter struggles to rising costs for recruiting and retaining drivers, to higher rail transportation rates, and to the July purchase of Houston-based Special Logistics Dedicated.

At the core of its results is the affirmation that J.B. Hunt is struggling to meet demand, which is strengthening as the company wrestles to maintain its driver force, Stephens analyst Brad Delco said.

Investors and analysts following J.B. Hunt have known the company would feel this pressure, but Delco said the third quarter's results indicate the company is being affected by the issue sooner than what was anticipated.

"Bottom line is, it's hard to find drivers to work in the industry," Delco said. "And it's harder to keep them."

Ahead of the earnings release, J.B. Hunt said its investors should be prepared to see gaps in its driver force cause problems in the third-quarter results. That proved to be the case, as the report showed. The company also told its customers to expect higher prices in the near future as it adjusts to the improving freight market.

"A good portion of that pricing will have to be passed along to the drivers to try and keep them," Delco said.

Expenses from salaries and wages for the company increased to $408 million from $374 million in the third quarter of 2016 and also were up from $389 million in the second quarter of this year.

It was a particularly volatile quarter for the industry, as supply chains were disrupted by major hurricanes in Texas, the East Coast and the Caribbean. J.B. Hunt said the storms rendered its intermodal operations unable to ship about 5,500 loads this past quarter, though its overall intermodal load count was 27,151 loads higher than in the same period last year.

Revenue per load grew to $2,030 from $1,983 last year, but the company said those benefits could not withstand the costs to find drivers or the issues with railway congestion and other "inefficiencies." J.B. Hunt said it had to spend about $1.8 million in unexpected costs to work through the hurricane delays.

In a preview note of J.B. Hunt's third-quarter results, Stephens said load opportunities in the spot market were "plentiful" because of the hurricane disruption, adding it expected to see J.B. Hunt's profit margins improve in its integrated capacity solutions segment, which brokers spot freight.

Delco said the company met expectations there. The company in that segment saw 2,603 fewer loads but made about $1,138 per load, up from $973 in the third quarter of 2016. That left its 12.8 percent profit margins flat compared with the same period last year but better than its 11.6 percent margins in the second quarter of this year.

Shares of J.B. Hunt closed at $104.01, down $4.34, or nearly 4 percent, in trading Friday on the Nasdaq. Shares have traded as high as $111.98 and as low as $78.20 over the past year.

Business on 10/14/2017

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