Rail Service Revival Boosts J.B. Hunt's Growth Prospects: Analyst Sees Significant Volume Expansion

Zinger Key Points
  • Analyst raises price target from $200 to $220.
  • The analyst believes that intermodal could be entering a period of growth not seen since the mid-2010s.

BMO Capital Markets analyst Fadi Chamoun upgraded the shares of J.B. Hunt Transport Services Inc JBHT from Market Perform to Outperform rating and raised the price target from $200 to $220.

The analyst says that total rail industry volumes have underperformed their historical relationship to industrial production by an average of 2.9 million carloads per year, between 2020 and 2023, or 6.8% of 2019 levels.

Rail service has shown signs of improvement that is supportive of share recapture and volume growth in 2024, even in a flat macro, adds the analyst.

This can be beneficial to JBHT as two-thirds of the missed rail opportunity has been intermodal, including domestic containers that JBHT manages, writes the analyst. 

The relationship between JBHT and railroad company BNSF is at a high-water, and with the two companies now being each other’s sole partner in the west, the analyst sees greater collaboration across service, communication, and marketing efforts will draw growth opportunities.

The analyst projects an intermodal volume growth CAGR of 6.6% over the next five years for JBHT, a pace of growth not seen since the mid-2010s. 

The analyst believes intermodal marketing companies (IMCs) are most leveraged to this opportunity and view JBHT as being best positioned among them. 

Price Action: JBHT shares are trading higher by 2.24% at $190.79 on the last check Monday.

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