J.B. Hunt Misses Analysts' First Quarter Earnings And Revenue Estimates - JB Hunt Transport Servs (NASDAQ:JBHT)

J.B. Hunt Transportation Service's JBHT earnings and revenues fell short of analysts' expectations in the first quarter of 2019, causing its stock to drop 4 percent at the end of trading on Monday, April 15.

The Lowell, Arkansas-based company reported earnings of $119.6 million, or $1.09 a share in the first quarter of 2019, compared with $118.1 million, or $1.07 a share in the same period a year ago. Its earnings per share fell 13 percent below analysts' expectations of $1.25 a share.

The company reported that its operating revenue rose to $2.09 billion, which is up 7 percent from the same period a year ago, but fell 5 percent below analysts' estimates of $2.2 billion.

According to the company's release, benefits from higher customer rates and new customer contracts were offset by increased rail purchased transportation costs; lower intermodal network utilization; lower productivity in winter weather-affected regions; higher driver and non-driver salaries, wages and benefits; higher Final Mile Services (FMS) network facilities costs; increased technology spend on the J.B. 360 platform and legacy system upgrades; and increased equipment ownership and maintenance costs.

Net interest expense for the first quarter increased 43 percent from the same time period in 2018 due to "increased debt levels and higher effective interest rates" on the company's debt.

Within its operating divisions, intermodal load growth was up 11 percent, but its revenue per load, excluding fuel surcharges, decreased approximately 7 percent over first quarter 2018 levels.

"Volumes were affected by the expected rail lane closures and persistent severe winter weather events impacting Chicago operations," J.B. Hunt said in its release.

The company said higher wages for drivers contributed to the lower numbers, but that wage incentives have eased up except in tight markets like California and Chicago, said Nick Hobbs, president of dedicated contract services of J.B. Hunt, on a call with reporters and analysts on April 15.

J.B. Hunt also mentioned the $100 million purchase of Cory 1st Choice Home Delivery, which it acquired in mid-February.

Final Mile Services recorded a revenue increase of $26 million compared to the first quarter of 2018.

Dedicated Contract Services (DCS) segment revenue was $602 million, up 22 percent over the same quarter in 2018.

DCS saw fleet growth of 1,644 additional revenue-producing trucks compared to the first quarter of 2018. The company said approximately 41 percent of these additions represent private fleet conversions and 9 percent represent FMS versus traditional dedicated capacity fleets. Customer retention rates remain above 98 percent, the company said.

Productivity, excluding fuel charges, increased approximately 4 percent, primarily from "customer rate increases and improved integration of assets between customer accounts," the company said in the release.

J.B. Hunt's operating income jumped 24 percent from a year ago, "primarily from increased productivity and additional trucks under new customer contracts, partially offset by higher facilities rent and costs to expand the FMS network, increased driver wages and higher recruiting costs including the length of time to fill open trucks" in certain regions of the country.

Integrated Capacity Solutions (ICS) load growth was up 2 percent with revenues of $301 million. However, its operating income was down 22 percent to $7 million.

In the Intermodal division, revenue grew slightly, up 2 percent to $1.09 billion, while operating income dropped 10 percent to $103 million.

The slight revenue growth was the result of a 10 percent increase in revenue per load, which is "determined by the combination of customer rates, fuel surcharges and freight mix," the company said.

The company noted that $186 million of total revenues was executed through the J.B. Hunt 360 marketplace.

In J.B. Hunt's truck division, revenues were up 10 percent to $102 million. However, the division's volume was negatively impacted by bad weather in the Midwest by approximately 2,200 loads, the company said. Its revenue per load, excluding fuel surcharge, increased 8 percent "primarily from a 12 percent increase in rates per loaded mile and a 4 percent decrease in length of haul compared to the same period in 2018.

At the end of the first quarter, J.B. Hunt was operating 2,043 tractors compared to 1,926 in 2018.

In the intermodal segment, the number of loads hauled in the first quarter of 2019 was 459,924, down from 495,764 in the same quarter of 2018. The average length of haul was 1,652 miles, down from 1,661, while the revenue per load was $2,366, up from $2,159 in the first quarter.

In dedicated freight, J.B. Hunt posted 825,174 loads in the first quarter, up from 688,350 loads in the first quarter of 2018. The average length of haul was 173 miles in the first quarter of 2019, down from 183 miles in the same quarter of 2018, and the revenue per truck averaged $4,589, up from $4,340 per truck.