Market Overview

Bank of America Downgrades J.B. Hunt to Neutral; JP Morgan Lowers Price Target


Trucking company J.B. Hunt Transport (NASDAQ: JBHT) released its fiscal second-quarter earnings results after the closing bell on Tuesday. The company reported in-line earnings per share results, but revenues missed Wall Street expectations. During Tuesday's trading session, the stock is lower by more than 6 percent to $54.68.

J.B. Hunt reported net income of $80.5 million or $0.67 per share, compared to $65.7 million or $0.53 per share in the year ago period. This met consensus EPS expectations of $0.67.

Revenues in the period were $1.26 billion, up from $1.15 billion in last year's second-quarter. This missed Wall Street analysts' consensus revenue estimates of $1.30 billion.

Analysts at Bank of America Merrill Lynch downgraded the stock in light of the weak results. They also lowered their price target on the stock from $61.00 to $60.00. They wrote that the stock had run up to within 4% of the firm's price target and that with 2Q12 intermodal volumes slightly below their target, the stock could lose some of its premium valuation.

Analysts at JP Morgan also weighed in on the quarter. In light of the weak revenues, JP Morgan lowered its price target on the stock from $64.00 to $61.00. JP Morgan also removed J.B. Hunt shares from their "analyst focus list," but retained on Outperform rating on the stock. With the stock up considerably versus the S&P 500 in 2012, meaningful upside momentum may not be likely. JP Morgan wrote, "following this strong run and in light of our sense of a lack of upward momentum in EPS estimates in the near term, we believe that upside potential is somewhat less compelling and we are removing JBHT from the JP Morgan Analyst Focus List. JBHT's medium term growth story remains attractive and we are maintaining our OW rating on the stock."

The light revenue has dragged down related trucking stocks as well on Tuesday. Shares of Werner Enterprises (NASDAQ: WERN) were lower by around 3 percent on the session and that stock was downgraded by Sterne Agee from Buy to Neutral. The analysts cited disappointing earnings reports from other trucking companies and a tough operating environment for the downgrade.

Other stocks that are lower on the session include Arkansas Best (NASDAQ: ABFS), ConWay (NYSE: CNW), and Old Dominion Freight (NASDAQ: ODFL).

The report could cause concern in industrial names as well. Dow Theory posits that a turn down in transports will be followed by a decline in the industrial sector. Major industrial names such as Caterpillar (NYSE: CAT) and Cummins (NYSE: CMI) were underperforming the market in afternoon trading, with Caterpillar posting a small gain and Cummins a small loss.


Related Articles (ABFS + CAT)

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