On Wednesday, J.B. Hunt Transport Services (NASDAQ:JBHT) experienced a downgrade in its stock rating from CFRA, shifting from Hold to Sell. The firm also adjusted the price target for the company's shares, bringing it down from $174.00 to $151.00. This change comes after an evaluation of the company's financial performance and market position.
The analyst from CFRA justified the downgrade and new price target by pointing to a forward P/E of 20.4x based on the 2025 EPS estimate, which aligns with J.B. Hunt's five-year average. The firm also revised its EPS forecasts for the upcoming years, decreasing the 2024 EPS estimate marginally by $0.03 to $5.68, and the 2025 estimate more substantially by $0.34 to $7.38.
J.B. Hunt reported a 3% year-over-year decline in Q3 sales, attributed to reduced revenue per load in their Intermodal and Truckload segments, alongside lower volumes in Integrated Capacity Solutions and Dedicated Contract Services, and a 6% drop in stops within their Final Mile Services. However, this was partially balanced by increased volumes in the Intermodal division. Despite these challenges, the company's operating margin saw a slight decrease of 30 basis points year-over-year, influenced by lower revenues and elevated costs, including wages and benefits.
The performance of J.B. Hunt's various segments varied, with the Intermodal division's sales remaining flat and operating income falling by 13%, while Dedicated Contract Services saw a 5% decrease in sales and a 7% dip in operating income. Integrated Capacity Solutions experienced a 7% decline in sales and reported negative value in operating income. Final Mile Services had a 3% sales decline and a 7% decrease in operating income, and the Truckload segment encountered a 12% reduction in sales but a 6% increase in operating income.
Despite the company's Q3 earnings per share of $1.49 surpassing the consensus estimate by $0.08, CFRA downgraded J.B. Hunt to Sell. The rationale behind the downgrade is the belief that the stock is overvalued, especially given the analyst's view that J.B. Hunt will face difficulties in expanding margins above historical levels due to rising operating costs and intensifying competition in the industry.
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