What’s Driving Growth For J.B. Hunt Stock?

J.B Hunt Transport Services stock (NASDAQ: JBHT) has seen a 20% fall this year, performing in line with the broader S&P500 index, down 21%. Even if we look at the longer term, JBHT stock, with 42% returns from levels seen in late 2017, has performed in line with the S&P 500 index, up 41%. After its recent fall, JBHT stock looks like it has room for growth from its current level of around $165, as discussed below.

This 42% rise for JBHT stock since late 2017 can primarily be attributed to 1. J.B. Hunt Transport Services’ revenue rising a significant 69% to $12.0 billion in 2021, compared to $7.2 billion in 2017, 2. a 4.3% fall in its total shares outstanding to 105 million, driven by $606 million spent on share repurchases over this period, partly offset by 3. a 15% fall in the company’s P/S ratio to 1.4x trailing revenues currently, compared to 1.7x in 2018. The increase in revenue and a fall in shares outstanding has meant that J.B. Hunt’s revenue per share rose 77% to $115.48 in 2021, vs. $65.37 in 2017. Our dashboard on Why J.B. Hunt Transport Services Stock Moved has more details.

J.B. Hunt’s revenue has steadily risen with increased trucking demand. Of late, it has benefited from a rise in volume driven by increased demand and better pricing, including the impact of higher fuel surcharges. The company’s integrated capacity solutions and truckload businesses, in particular, have seen substantial growth over the recent past. For perspective, the combined revenues from these two segments have risen nearly 2x to $3.3 billion in 2021, compared to $1.7 billion in 2019, before the pandemic.

While the strong trucking demand was visible over recent years, the outlook has changed now with rising inflation and interest rates. The U.S. economy has been weak, with GDP contracting over the last two quarters. Consumers have also been scaling back on retail spending amid high inflation while spending more on travel and experiences. These macroeconomic factors could weigh on J.B.Hunt’s volume growth in the near term.

The company’s operating ratio is higher at 91.4% in 2021 and hasn’t changed much from 91.3% in 2017. The company’s operating margin has hovered between 8 and 9% over the past few years. Our J.B. Hunt Transport Services Operating Income dashboard has more details.

Despite the near-term headwinds, J.B. Hunt is expected to see around 23% top-line growth this year to over $15.0 billion (per the consensus estimate). Assuming the current share count of 104 million (reported for Q2 2022), we arrive at the expected revenue per share of $144.11 for the full year 2022. Now, at its current levels, JBHT stock is trading at 1.1x forward expected revenues, compared to the last three-year average of 1.3x, implying that it has more room for growth.

While JBHT stock looks like it has some more room for growth, it is helpful to see how J.B. Hunt Transport Service’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities, which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for CSX vs. Amcor.

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[1] Month-to-date and year-to-date as of 9/23/2022
[2] Cumulative total returns since the end of 2016

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