The Tax Cut and Jobs Act is likely to boost the transportation sector and J.B. Hunt Transport Services, Inc. JBHT is no exception. Evidently, shares of the company have outperformed the industry it belongs to in December 2017. The stock has gained 5.5% compared with the industry’s gain of 2.9%.
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J.B. Hunt 's growth by acquisition strategy raises optimism. To this end, the company had announced its decision to acquire Special Logistics Dedicated and its affiliated entities for $136 million in 2017. Post completion, the acquisition is expected to enhance the company's e-commerce delivery capabilities. Notably, the transaction will be accretive in 2018. Additionally, volume growth across the company’s primary division — intermodal — is also encouraging.
The company’s efforts to reward shareholders through dividend payments and share repurchases are also impressive. As of Sep 30, 2017, the company had roughly $521 million remaining under its total share buyback authorizations.
The company recently provided an update on its fourth-quarter 2017 earnings, slated to be announced on Jan 18. It anticipates earnings per share (on a reported basis) between 77 cents and 82 cents in the final quarter. The projection is inclusive of a charge to the tune of 11 cents for a reserve on a cash advance for the purchase of new trailing equipment from a manufacturer that will not meet delivery. Additionally, it includes an increase in reserves to the tune of 10 cents pertaining to certain insurance and claims.
J.B. Hunt further expects its bottom line to vary between 98 cents and $1.03 per share, excluding the above charges. Revenues in the quarter are predicted in the range of $1.9-$ 2.0 billion.
Effective tax rate in the final quarter of 2017 is estimated to be 37.6%. Even though the tax overhaul, which became a law on Dec 22, is expected to have minimal effect on the company’s fourth-quarter operating income, it is expected to aid J.B. Hunt thereafter by significantly reducing its tax bill. This will leave more cash for J.B. Hunt to fund its capital expenditures, acquisitions, share repurchases among others.
In view of the above positives, we believe investors would do better to retain J.B. Hunt stock in their portfolio for now.
Zacks Rank & Key Picks
J.B. Hunt carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Gol Linhas Aereas Inteligentes S.A. GOL, LATAM Airlines Group S.A. LTM and SkyWest, Inc. SKYW. While Gol Linhas and LATAM Airlines sport a Zacks Rank #1 (Strong Buy), SkyWest carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Gol Linhas, LATAM Airlines and SkyWest have surged around 221%, 69% and 45%, respectively, in 2017.
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