Knight-Swift & J.B. Hunt Put Trucking Stocks In Focus
Zacks Investment Research | Jan 20, 2019 09:18PM ET
Investors interested in the truck industry heaved a sigh of relief on Jan 17 courtesy of encouraging updates from two key players in the space — J.B. Hunt Transport Services (NASDAQ:JBHT) and Knight-Swift Transportation Holdings (NYSE:KNX) .
The respite came especially since the truck industry has struggled lately mainly due to headwinds like capacity crunch due to driver shortage. Factors such as tight labor market conditions and the Electronic Logging Devices (ELDs) have aggravated the situation. As old drivers are retiring, recruitment of new ones is becoming difficult, thanks to lack of unemployed people, the hefty nature of the job and low pay.
The dismal price performance of the Zacks Transportation - Truck industry in a year’s time bears testimony to the challenges. The industry has shed 15.5% value in the period, making its performance worse than that of the Zacks S&P 500 composite, which has declined 5.7%.
Knight-Swift’s Upbeat Q4 Guidance
Shares of Knight-Swift have gained almost 12% ever since it issued a bullish guidance for fourth-quarter 2018 earnings per share on Jan 17. Detailed results will be out on Jan 29.
The gains were not limited to Knight-Swift as other players in the space like Marten Transport (NASDAQ:MRTN) and Forward Air Corporation (NASDAQ:FWRD) too gained following the upbeat fourth-quarter guidance.
Citing factors like improvement in revenue per loaded mile, lower fuel costs, enhanced safety and better adjusted operating ratios across its reportable units, Knight-Swift lifted its projection for fourth-quarter earnings per share. The Phoenix, AZ-based company now expects adjusted earnings between 91 cents and 93 cents (the earlier guidance had hinted at earnings in the 71-75 cents range). The Zacks Consensus Estimate is pegged at 72 cents per share.
Moreover, first-quarter earnings (on an adjusted basis) are now anticipated between 52 cents and 55 cents (the earlier guidance had hinted at earnings in the 50-54 cents range). The Zacks Consensus Estimate is pegged at 53 cents per share.
The company predicts adjusted earnings for the second quarter of 2019 between 62 cents and 66 cents.
J.B. Hunt’s Robust Q4 Also Buoys Industry
J.B. Hunt Transport Services also brought encouraging news for the trucking industry on Jan 17. Shares of this Lowell, AR- based company gained 6% on Jan 17 following its outperformance in the fourth quarter of 2018. The robust earnings report not only boosted the J.B. Hunt stock, but gave the entire industry a lift, just like Knight-Swift’s upbeat guidance.
J.B. Hunt’s results were driven by impressive performances at its key segments —Intermodal (JBI), Dedicated Contract Services (DCS), Integrated Capacity Solutions (ICS) and Truck (JBT). Revenues at the JBI, DCS, ICS and JBT segments improved 15%,25%, 7% and 21%, respectively, on a year-over-year basis leading to the company’s stellar performance in the final quarter of 2018.
Strong Freight Demand Stands Trucks in Good Stead
High freight rates as a result of an impressive shipping demand aided J.B. Hunt’s top line in the fourth quarter of 2018, which increased 16.5% year over year. In fact, robust freight demand and the resulting steep rates are major positives for the industry.
In this regard, the ongoing capacity crunch has a favorable impact. The low truck count coupled with high freight demand is pushing up already high shipping rates. In fact, the Zacks Investment Research
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