J.B. Hunt Pulls Far In Front Of Rivals

by Jan Cottingham  on Monday, May. 14, 2012 12:00 am  

Any snapshot of a publicly traded company's performance as measured by share price is arbitrary, depending on which starting and ending dates are chosen.

But by almost any measure, J.B. Hunt Transport Services Inc., the third-largest trucking company in Arkansas, is an outlier among the four public trucking companies based in the state. The company, with headquarters in Lowell, continues to perform strongly while its rivals struggle to move past an economic downturn that refuses to relax its grip on some transport firms.

Some indicators of this healthy performance:

  • From Jan. 3, 2011 (the first trading day of last year), to May 4, 2012, the price of J.B. Hunt shares rose 34.4 percent.
  • In the first quarter of this year, the company reported record net income of $67.7 million, compared with $50 million during the year-earlier quarter.
  • For all of 2011, J.B. Hunt saw its profit grow to $257 million, compared with $199.6 million in 2010.

"We don't see any reason why JBHT will not have another record for earnings in 2012 provided that the economy does not fall into a recession, which we view as the biggest risk to that outlook," Michael Baudendistel, an analyst with Stifel Nicolaus, said last month in an investors note.

Dee Gill, writing for Forbes online about investing, on April 23 noted:

"Hunt's first quarter earnings report make those shares awfully tempting. Revenue increased 16.5% year-over-year to $1.17 billion, and earnings per share were up 43% to 57 cents. It's doing a booming inter-modal business in which it carries around containers that transfer seamlessly onto trains and ships. Its prices are up. Its operating profit margin was up nearly 6.5% despite those notoriously high prices at the fuel pumps."

In contrast, during that same period (Jan. 3, 2011, to May 4, 2012), the three other publicly traded trucking companies headquartered in the state saw share prices fall:

  • Arkansas Best Corp. of Fort Smith, a decline of 47.48 percent.
  • USA Truck Inc. of Van Buren, a 51.65 percent drop.
  • P.A.M. Transportation Services Inc. of Tontitown, a 8.48 percent slide.

These three companies reported mixed results in first-quarter 2012.

  • Arkansas Best, the parent company of ABF Freight System Inc., the seventh-largest trucking company in the state, experienced a first-quarter net loss of $18.2 million, compared with a net loss of $12.8 million in the year-earlier quarter.
  • USA Truck, the ninth-largest trucking company in Arkansas, reported a net loss of $4.9 million for the quarter ended March 31, compared with a $2.7 million net loss in first-quarter 2011.
  • But P.A.M. Transportation, No. 10 on the Arkansas Business list of largest trucking companies doing business in the state, saw a profit in first-quarter 2012, though a slim one: $674,193, compared with a $1.98 million net loss in the first quarter of 2011. It was the company's first first-quarter profit in five years.

All four companies reported increases in revenue during 2011, ranging from P.A.M.'s 8.21 percent rise to USA Truck's 53.5 percent leap. They have, however - again with the exception of J.B. Hunt - struggled with profitability.

J.B. Hunt's quarter-billion-dollar profit on revenue of $4.5 billion was by far the best.
"We are very pleased to close out the year with record revenues, net earnings and earnings per share in both the fourth quarter and the entire year of 2011," said John N. Roberts III, J.B. Hunt's CEO since Jan. 1, 2011.

Arkansas Best reported a return to profitability for full-year 2011 with net income of $6.8 million, as against a net loss of $32.6 million for 2010. The company, under the leadership of CEO Judy McReynolds, had been working to whittle down significant losses stemming from the economic downturn.

Its first-quarter 2011 net loss was $12.8 million, mitigated only by the fact that it was better than the $21.4 million loss in the first quarter of 2010. The second quarter saw Arkansas Best report net income of $5.3 million; third quarter, $12.3 million; and fourth quarter 2011, $2.1 million.

"During 2009, that was really the worst year in terms of the recession," McReynolds told Arkansas Business. "We consider that year to be the worst recession since the Great Depression. And its impact on our business was very dramatic. Part of the improvement that we experienced in 2010 and 2011 was just coming off of that bottom and the economy improving."

USA Truck has fought with losses every year since a $3.14 million profit in 2008, and in 2011, the company reported a net loss of $10.8 million.

USA Truck experienced "significant difficulties in implementing a new enterprise management software system," CEO Cliff Beckham said in a February news release.

"These difficulties caused a lack of visibility of freight in our system and numerous customer service disruptions. The service failures and lack of confidence in booking freight caused us to lose a percentage of our loads with many customers, often the most operationally demanding, highest paying loads."

P.A.M. Transportation reported a net loss of $2.9 million last year, compared with a net loss of $654,728 for 2010.

Dan Cushman, president and CEO of P.A.M., told Arkansas Business that 2011 was difficult for the company because P.A.M.'s fleet of 1,750 trucks was aging and the company struggled to maintain it.

Among P.A.M.'s weaknesses going into the recession, Cushman said, was that the company was seen in the industry as only an automotive carrier. The reality, however, was harsher. "It was worse than that. It was one customer," Cushman said, declining to name the single company on which P.A.M. depended.

Cushman's immediate goal was to diversify P.A.M.'s customer base and reduce its reliance on the faltering U.S. auto industry.

Diversification Limits Exposure

J.B. Hunt has four primary segments.

  • Intermodal, the company's largest segment, operates the largest fleet of privately owned containers in North America, operating in a nationwide rail network.
  • The dedicated contract services (DCS) segment designs, develops and executes customer-specific supply chain networks.
  • Integrated capacity solutions (ICS), founded in 2007, seeks to connect shippers to carriers for efficient transportation of goods.
  • The truck segment (JBT), which makes it one of the nation's largest publicly traded truckload carriers.

In the last 10 years, the company has diversified, moving past full-truckload shipping. Instead, it has emphasized intermodal - the movement of containerized cargo using different forms of shipping - and dedicated contract services.

This shift in strategy meant that J.B. Hunt was less exposed to losses when the Great Recession hit full force in 2008 and devastated the trucking industry, or at least the asset-based trucking sector, a leading indicator of economic trends.

The company's flexibility and its dedication to cost-cutting and efficiency have served J.B. Hunt - and its shareholders - well.

"During 2011, we began implementing improvements to the approach we take with our larger, more complex customers and we are satisfied so far with the results of these efforts," Roberts noted in a Jan. 26 news release.

"The primary objective in collaborating with customers is to find new ways to integrate our complementary business segments to drive out cost and create efficiency. We will continue to invest in customer centric services that produce sufficient rates of return and sustainable cycles of cash for further reinvestment and innovation in transportation solutions."

 

 

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