Why J.B. Hunt Transport Services Rallied Over 20% Today
Key Points
J.B. Hunt handily beat low expectations in the third quarter.
The company is reacting to lower volumes with price increases and cost cuts.
Even though revenue declined, earnings per share were up handily as the company continues repurchasing stock.
Shares of J.B. Hunt Transport Services (NASDAQ: JBHT) rallied on Thursday, up 20.9% as of 1:30 p.m. ET.
J.B. Hunt published its third-quarter earnings release last night, beating expectations for both revenue and earnings per share.
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The stock had fallen this year even as the broader markets have rallied, due to tariff-related slowdowns in trade and flagging consumer confidence. Therefore, it didn't take much to get the stock moving again, as management's cost-cutting efforts boosted the bottom line.
J.B. Hunt is a good house on a bad block
In the third quarter, J.B. Hunt saw revenue decline slightly at (0.7%) relative to the year-ago quarter, but managed to grow operating income by 8% and earnings per share up an even higher 18% to $1.76. That bottom-line profit and even the top-line figure both beat expectations.
J.B. Hunt's results were actually impressive, given that load volume was well below the revenue declines. But the company managed to grow revenue per mile served while also lowering costs. Of note, the company is in the midst of a $100 million cost-savings program, of which management said it was able to cut $20 million in the third quarter.
The company also took advantage of its lower stock price this summer to repurchase 1.6 million shares for $230 million, good for about 1.7% of shares outstanding.
Image source: Getty Images.
J.B. Hunt is no longer "cheap"
After today's surge, J.B. Hunt trades at 28.6 times this year's estimates and 24.1 times next year's earnings estimates, which is no longer exactly cheap. This is especially the case as tariff-related headwinds don't seem to be going away, although the Federal Reserve could ease the pressure a bit with more interest rate cuts.
Management should be commended for outperforming the industry and streamlining costs, but interested investors may want to wait for a pullback before buying or adding to J.B. stock again.
Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.