Will This Downgrade Hurt J.B. Hunt Transport (JBHT) Today?

NEW YORK (TheStreet) -- J.B. Hunt Transport (JBHT) has been downgraded to "neutral" from "buy" with a $78 price target, Bank of America said Thursday. The firm said its Burlington Northern service issues could constrain growth for a couple of quarters. 

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Separately, TheStreet Ratings team rates HUNT (JB) TRANSPRT SVCS INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate HUNT (JB) TRANSPRT SVCS INC (JBHT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • JBHT's revenue growth has slightly outpaced the industry average of 4.8%. Since the same quarter one year prior, revenues rose by 10.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • HUNT (JB) TRANSPRT SVCS INC has improved earnings per share by 10.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HUNT (JB) TRANSPRT SVCS INC increased its bottom line by earning $2.86 versus $2.59 in the prior year. This year, the market expects an improvement in earnings ($3.32 versus $2.86).
  • Net operating cash flow has increased to $163.12 million or 24.80% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.71%.
  • JBHT's debt-to-equity ratio of 0.70 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.82 is weak.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Road & Rail industry and the overall market, HUNT (JB) TRANSPRT SVCS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.

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