On Wednesday, a Benchmark analyst lowered the price target for J.B. Hunt Transport Services (NASDAQ: JBHT) shares to $185 from the previous $200 while maintaining a Buy rating on the stock. The adjustment comes ahead of the company's second-quarter earnings report, which is scheduled for next week.
The analyst from Benchmark indicated that J.B. Hunt has been facing challenges this year, including excess costs and capacity that were intended to meet an expected increase in domestic intermodal volume and pricing. These anticipated improvements have not yet occurred.
The transportation company has also been dealing with competitive intermodal pricing, private fleet growth that is suppressing truckload (TL) prices, and a negative operating profit in its Integrated Capacity Solutions (ICS) segment.
The report suggested that the second quarter might not mark the turnaround that was hoped for. Concerns were raised that J.B. Hunt may not be able to manage these excess costs, approximately $100 million, if the oversupply in the TL market persists. As a result, the firm has revised its earnings estimates for J.B. Hunt for the second quarter, as well as for the full years of 2024 and 2025.
Despite the current challenges, Benchmark's analysis suggests that there is potential for improvement once TL prices recover. Opportunities for over-the-road (OTR) conversions and increased transloading activities, spurred by rising imports, are expected to benefit J.B. Hunt, especially due to its exclusive partnership with BNSF in the western United States.
The company has also intensified its marketing efforts to boost intermodal growth. The new price target of $185 reflects these revised estimates and the protracted weak freight environment.
In other recent news, J.B. Hunt Transport Services has been the subject of several analyst reports. Barclays maintained an Equalweight rating on J.B. Hunt's stock, citing the company's strong position in the intermodal and dedicated trucking markets despite industry oversupply and weak freight demand.
In contrast, Benchmark lowered its price target for J.B. Hunt to $200 from $215 while maintaining a Buy rating due to lower-than-expected operating profit across all business segments.
BMO Capital also reduced its price target for J.B. Hunt to $200 but retained its Outperform rating, expressing confidence in the company's long-term potential despite near-term challenges.
J.B. Hunt's aggressive expansion strategy post-pandemic, aiming to increase its Intermodal container fleet by approximately 50% from 2021 levels, has been met with cost inefficiencies and low rates amidst weak freight demand.
The company's second-largest business, Dedicated trucking, has also seen slowed growth. J.B. Hunt recently reported a GAAP EPS of $1.22, notably lower than the anticipated $1.50 by FactSet and $1.61 by Benchmark.
In addition to the analyst reports, J.B. Hunt announced a quarterly dividend of $0.43 per common share, demonstrating the company's commitment to returning value to its shareholders. These recent developments provide investors with a comprehensive understanding of the company's current financial landscape and future prospects.
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