JB Hunt Upped To Buy At Longbow, Firm Sees Positive Regulatory Catalysts

In a report published Thursday, Longbow Research analyst Mathew S. Brooklier upgraded the rating on

from Neutral to Buy, while establishing a price target of $102. JB Hunt is poised to benefit from improving rail service levels, which bottomed out in 2014, and a pending regulatory change. Analyst Mathew Brooklier pointed out, "Stepped up investment by Class I railroads – including BNSF and NSC (80% of JBHT Intermodal volume) – this year and last has resulted in tangible service level improvements." JB Hunt's Intermodal volumes are expected to accelerate with the company's "drayage network also finding better balance and increased efficiency." The company is also expected to benefit from an improvement in Intermodal pricing due to a supply constrained domestic shipping environment. In the report Longbow Research noted, "We believe Intermodal pricing could be better than anticipated this year seeing benefits from a directionally tightened Truck market since early 2014. While more recent TL market moderation and lower y/y fuel could in the near term work against Intermodal price momentum, we still see the potential for JBHT to hit the higher end of a 2%-4% yield growth range." A pending regulation: Electronic Logging Device (ELD) rule could materially reduce the Truck market capacity, which in turn may boost the truck to Intermodal conversions. The consequent volume and yield benefits could drive JB Hunt's performance up, the report noted. The EPS estimate for 2016 has been raised from $4.27 to $4.31.