J. B Hunt’s revenue, profit up

But adjusted 4Q results shy of expectations; shares fall

J. B. Hunt Transport Services Inc. reported increases in revenue and profit Thursday for the final quarter of 2016, though its stock dropped as the market reacted to results that fell below analyst expectations after one- time costs and payments were taken into account.

Profit for the quarter ending Dec. 31 was $ 117.6 million, up 0.7 percent from the same three- month period of 2015. It breaks down to $ 1.05 earnings per share for the Lowell company, a 4 percent increase from $ 1.01 in 2015.

The earnings per share were 4 cents more than the average prediction of 23 analysts polled by Yahoo Finance: $ 1.01. However, after taking into account one- time benefits and charges, Brad Delco, transport analyst at Stephens Inc., said, the resulting 99 cents earnings per share fell below the consensus expectation, though it matched Stephens’ own prediction.

The largest one- time benefit noted was $ 9.5 million resulting from changes to the company’s paid time- off policy.

Joanna Bunten, senior director of corporate marketing, said J. B. Hunt moved “from multiple time- off plans to a single PTO policy in an effort to streamline sick, vacation and floating holiday time.” She said that employees did not see a decrease in paid time off, and the new policy is “providing them with the flexibility to use their time for any reason.”

The company also reported about $ 5 million in assorted one- time charges.

“When you take out the one- time benefits and charges, they didn’t do so great, even though revenues are up and volumes are up,” said Bob Williams, senior vice president and managing director at Simmons First In-

vestment Group.

Shares of J. B. Hunt trading on the Nasdaq exchange closed Thursday at $ 94.36, down 3.7 percent.

“I think things are setting up for improvement in the latter part of 2017 and early 2018,” Delco said. “Higher fuel prices, a tightening truck- driving market and tightening industry capacity all bode well for J. B. Hunt’s future results.”

Total revenue rose 6 percent to $ 1.7 billion for the quarter, from $ 1.6 billion in the fourth quarter of last year. This brought the company’s revenue for the full year to $ 6.6 billion, a 6 percent increase from 2015’ s $ 6.2 billion. Annual earnings per share came to $ 3.81 in 2016, up 4 percent from $ 3.66 in 2015. Total profit for the entire year was up 1.1 percent to $ 432.1 million compared with $ 427.2 million last year.

The company’s intermodal segment continues to account for more than half of its business but saw declines in its operating income, which the company blamed on expenses associated with purchasing new equipment and on costs of maintenance, insurance and claims and driver recruiting and retention.

Operating income refers to profit before interest and taxes. The intermodel segment reported $ 998 million in revenue, a 3 percent jump from last year. However, revenue per load dropped 2 percent, which the company attributed to higher customer rates, freight mix and decreased revenue from fuel

surcharges due to lower fuel prices.

The Fortune 500 company is the country’s largest intermodal truckload carrier. Intermodal refers to shipping freight containers using multiple modes of transportation. The company pioneered this practice through a partnership with the Santa Fe Railway Co. beginning in the early 1990s, and its intermodal business now has nearly 5,300 tractors and under 85,000 pieces of trailing equipment; both counts are up from last year.

The dedicated contract services division reported the highest increase in operating income of the segments, up nearly 40 percent to $ 57.5 million from 2015. Revenue jumped 8 percent to $ 398 million, and revenue per truck per week rose 5 percent to $ 4,247. The company noted that new customer accounts, rate increases and “improved asset utilization” contributed to the results. The segment still constitutes 23 percent of total business and has grown its equipment numbers to about 7,400 trucks and under 23,000 pieces of trailing equipment.

“In terms of the relative performance, the dedicated segment continues to be the shining star in these results,” said Delco of Stephens Inc,.

He attributed it to several reasons. First, he said, the company is finding “opportunities to grow in different end markets, agriculture being one of those in particular. Second, I think other companies that have historically tried to run their own fleet of trucks are realizing that it’s particularly challenging, especially recruiting drivers. So as executives decide how best

to allocate capital, they’re deciding to outsource their transportation needs to J. B. Hunt’s dedicated segment.”

And finally, he said, because of the continuing regulatory changes to the industry, “shippers fear that it will become more challenging to find capacity, so why not go ahead and lock down dedicated capacity so you don’t get caught without a provider to move your freight.”

J. B. Hunt’s brokerage segment, which makes up 13 percent of total business, grew revenue by 22 percent. However, its operating income dropped by 52 percent. Revenue per load and gross profit margin also dropped, which the company blamed on “new customer rates,” increased personnel, claims and operations costs and lower rates in the spot market compared with last year. The segment has added eight branches since the fourth quarter of 2015 and has grown its staff by 23 percent, now employing 824.

The company’s smallest segment, trucking, struggled in a softer trucking economy. The company blamed the results on lower customer rates, maintenance costs, and

higher safety and insurance costs. Its revenue dropped 3 percent to $ 96 million. Revenue per tractor per week dropped 3.4 percent to $ 3,520, and operating income fell 35 percent to $ 6.8 million. The trucking segment slightly decreased its total tractor number to just over 2,000 and slightly increased trailers to about 7,600.

“Results were influenced by things like bad pricing from bids that became effective last year, but I think the underlying trends are getting better. Some of these positive signs may not be visible though for a couple quarters,” Delco said.