UBS Downgrades J.B. Hunt, Projects Cyclical Downturn In Transportation Market

J B Hunt Transport Services Inc JBHT may be facing some headwinds going into 2020, according to UBS. 

The Analyst 

Thomas Wadewitz downgraded J.B. Hunt from Buy to Neutral and lowered the price target from $121 to $96.

The Thesis

UBS has become increasingly convinced that freight is likely to remain weak through 2019, followed by falling truckload and intermodal contract rates in 2020, Wadewitz said in the Tuesday downgrade note. (See his track record here.) 

“While JBHT has differentiated intermodal and dedicated contract trucking businesses, it is not immune to freight and pricing cycles and we anticipate a period of weak EPS performance," the analyst said.

"We believe the soft EPS backdrop is likely to make it difficult for JBHT to work even considering that the stock is already 30% off its 12 month high." 

Current conditions are pointing to a "classical downturn" in freight and pricing, Wadewitz said. 

Last year was a period of strong freight and unusually strong pricing, which resulted in capacity entering the market in the second half of 2018 and first half of 2019, he said. 

“Inventories are elevated and multiple freight data series show weakness in 1H19 including the Cass Freight index, weekly rail volumes, and IATA air freight data. And the sharp decline in truckload spot prices clearly points to weaker contract rates in 2H19/2020.”

Price Action

J.B. Hunt shares were down 0.21% at $89.88 late in Tuesday's trading session. 

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