J.B. Hunt Transport Delivers Robust Earnings Despite Labor and Disruption Headwinds

J.B. Hunt Transportreorted better than expected Q3 earnings before the bell Friday.  $JBHT grew it’s revenues across all its segments despite labor challenges. With companies desperate to return to normal from the supply crunch freight demand has been accelerating.

J.B. Hunt Transportreorted better than expected Q3 earnings before the bell Friday. $JBHT grew it’s revenues across all its segments despite labor challenges. With companies desperate to return to normal from the supply crunch freight demand has been accelerating.

JB Hunt Semi

J.B. Hunt Transport (JBHT) Beat Earnings Before Open Friday

$1.88 Beat $1.78 EPS and $3.14 billion Beat $3.00 billion forecast in revenue 

Earnings

J.B. Hunt Transport reported Q3 earninsg that beat on the top and bottom lines. JBHT grew earnings by over 59% yr/yr to $1.88, topping the consensus by $0.10 and exceeding last quarter’s $0.04 beat. Revenue continued its strong growth from Q2, leaping 27.2% yr/yr to $3.14 bln ahead of the $3.002 billion consensus estimate. What impressed the market it was they were able to achieve this despite encountering many headwinds during the quarter. Indeed revenues across all its segments in Q3 despite labor challenges.

Market Reaction: J.B. Hunt Transport (NASDAQ: $JBHT) $190.55 ▲ $15.31 (▲ 8.74%)

JBHUNT Q3 2021 Overview

 

Increased Transit Times

Front and center with company updates has been companies dealing with increased transit times and the disruptions in inventory levels. NIKE in their report cited saw transit times impact its top line across each segment from late September and expects transit times to remain elevated for all of FY22 (ending April 2022). JBHT did see a significant impact on its Q2 results from labor shortages, including drivers, rail terminal operators, and port operators.

Revenue grew across all segments

JBHT’s smallest segment, Truckload (~6% of Q3 revenue), seeing the biggest jump in growth at 87% yr/yr. This segment includes purely truck drivers who pick up freight at one location and deliver it directly to the consignee’s location.

Most of the rise in revenue was due to a 65% increase in revenue per load and a 12% increase in load count from the year-ago period. Rising revenue per truck  was the primary reason for its jump in total revs in Q3. 

JBHUNT Q3 2021 Segments

JBHT saw labor issues in its largest segment, Intermodal (~45%), which includes both truck and rail delivery. However  in its next largest segment, Dedicated Contract Services (~21%).  JBHT added 1,527 revenue-producing trucks in its DCS fleet from the year-ago period and 744 additional trucks sequentially.

Labor shortages and rail restrictions experienced in JBHT’s Intermodal segment could be a big negative for railroad stocks, such as UNP, KSU, NSC, and CSX, which all report earnings in the coming weeks.

Since these headwinds led JBHT’s Intermodal segment to see total volumes decline 6% yr/yr, with a 9% drop in transcontinental loads, railroad stocks may have found it difficult to capitalize on the heightened demand.

Moving forward JBHT’s ability to grow revenues across all its segments despite ongoing labor shortages is a huge benefit, can that continue with the current labor situation is the big ask.   To counter that is that revenue is growth with  labor expense as a percentage of total revenue has actually shrunk 90 bps from 2019.

When and how supply chains return to normal will ahve a potential impact, positve or negative depending on where inventories and the economy is.  What is clear is  JBHT’s competitive position in intermodal transportation, which is a cheaper alternative to shipping via just truck, gives the company a competitive advantage even as supply chains begin to roll back to normal after supply chain challenges continue to pressure freight costs.

Source: JBHT

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