Will Q2 Costs Detour JB Hunt From Hitting Full Year Guidance?

J B Hunt Transport Services Inc JBHT reported a second-quarter earnings miss on Monday that was largely due to increased cost measures and saw its operating margin rate fall 140 basis points.

Loop Capital believes that despite the cost increases, the company’s full year guidance is still in tact.

“Despite decent overall revenues, cost pressures overwhelmed with operating expenses, ex-fuel, up 85% due primarily to higher rail purchased transportation expense, higher driver pay, and a higher incidence of accidents YoY,” said Loop Capital analyst Rick Paterson.

Loop is sticking to its Buy rating, but lowered its price target from $105 to $103.

While management did revise guidance, Patterson said it could have been worse, which saw reductions significant in its two smallest divisions: Truck revenues and margins were reduced, and ICS margins were reduced from 3-5 percent to 1-3 percent.

Analysts are keeping a close eye at truck pricing, which saw its first pricing uptick in nine quarters.

“We’re keeping a close eye on J.B. Hunt’s truckload pricing; a leading indicator of intermodal pricing,” added Patterson.