In the past 30 days, 13 analysts have raised their EPS estimates for this trucking company.
J.B. Hunt Transport Services, Inc. (JBHT)
From Argus Weekly Staff Report
Our rating on J.B. Hunt Transport Services, Inc. (JBHT), a major U.S. transportation company, is BUY. In our view, J.B. Hunt has successfully adapted to changes in customer demand for shipping and freight services. Over the last decade, it has reduced its traditional long-haul truck fleet by more than 60% (to about 2,000 trucks), and shifted its focus to intermodal, ‘truck-to-rail’ transport, and dedicated contract services, in which trucks are used by a single customer. These two businesses currently account for nearly 80% of revenue and continue to post strong growth.
Looking ahead, we expect earnings to benefit from limited trucking capacity, higher shipping rates, and increased demand for intermodal transport, though an arbitration case with an intermodal partner may depress multiples for a few quarters. Even so, we see value at current levels.
We think that JBHT shares are attractively valued at current prices near $106. Over the past 52 weeks, the shares have traded in a range of $88-$131. From a technical standpoint, the shares had been in a bearish trend of lower highs and lower lows after peaking in June 2018. Since bottoming in early January, they have begun to recover; the next point of resistance is $110.
On the fundamentals, the shares are trading at 16-times our 2019 EPS estimate, at the bottom of the three-year average range of 16-26. Compared to the transportation peer group (CSX, CP, UNP, CNI, NSC), valuations are mixed. We believe that higher multiples are warranted based on J.B. Hunt’s position as a leading intermodal carrier and prospects for market share growth. That said, the arbitration case with BNSF may depress multiples for a few quarters. Our target price is $125.
Jim Kelleher, CFA, Argus Weekly Staff Report, www.argusresearch.com, 212-425-7500, January 25, 2019