Higher costs and weaker demand led to an earnings miss at J.B. Hunt Transport Services (JBHT), and the company doesn't see things improving quickly. Investors are moving to the exit lane, sending J.B. Hunt shares down 9% as of 11:30 ET.
A weak market for transport
J.B. Hunt is a trucking and logistics company focused on hauling intermodal containers (the rectangular boxes designed to transition seamlessly from ship to rail to truck). The company earned $1.22 per share on revenue of $2.94 billion in the first quarter, far short of the $1.52 in EPS on sales of $3.12 billion that Wall Street had expected.
Revenue fell 9% year over year and operating income was down 30%, a reflection of weakening demand and the impact of higher costs. J.B. Hunt said that operating income as a percentage of revenue decreased due to higher wages and benefits, equipment maintenance expenses, and soaring insurance rates.
The company's freight brokerage unit handled 22% fewer loads in the quarter than it did a year ago.
Is J.B. Hunt stock a buy after its earnings miss?
Trucking is a cyclical business. J.B. Hunt has a reputation for being a solid operator, but there isn't much any transportation company can do if there isn't sufficient demand for its services. In February, management warned that 2024 rate negotiations were soft, and the first-quarter results seem to confirm as much.
On the expense side, there is little J.B. Hunt can do other than accept lower margins and wait for demand -- and therefore pricing power -- to return.
For long-term-focused investors looking to buy into strong operators in the transportation sector, the slump in J.B. Hunt's shares could be an opportunity. But given the uncertainty about when demand will rebound, there is no reason to rush in and buy the dip today.
