JB Hunt运输服务JBHT：复苏已被定价，回归结构性增长

Justine Weiss+1 917 344 8433justine.weiss@bernsteinsg.com RatingOutperform(Market-PerformOLD) Specialist Sales Steve Song+1 917 344 8401steve.song@bernsteinsg.com Price Target JBHT 329.00 USD(192.00OLD) J.B. Hunt Transportation Services (JBHT): A recovery is priced in, areturn to structural growth is not (Upgrade to Outperform, $329) We are upgrading JBHT to Outperform and raising our price target to $329. The stock hasrallied on better end market conditions, and with earnings geared to follow through an eventualpeak in truck rates we would rather be late than on the sidelines. The entire JBHT business model is levered to contract truck rates — and the rateenvironment is structurally changing.This is not new news, and a lot of money is in thelong truck rate trade, but the duration and rate of change are likely to be longer and moresignificant than we have seen in prior cycles as supply constraints should prove durable. Inflection in earnings power is significant, and lagged to the broader truck market.Times are good for JBHT now, they will get better as box turns improve in the broaderintermodal market catalyzing rates to move higher. Demand for Dedicated will also pick upas the cost of seating drivers increases, the Truck segment remains well below prior peakmargins, and brokerage remains a net loser (for now). This makes the stock an ideal long pairfor those looking to fade the TL move. Capital investments to fund growth have largely been made, setting the stage foroutstanding cash return.The difference between over investing and investing aheadof future growth is small, but significant when future growth arrives. JBHT has 15% ofintermodal box capacity idled, and more if one considers containers that have not beenretrofitted (Walmart fleet purchase). As a result, free cash flow over the next several yearsshould be sustainable at levels we have not really seen before. Investment Implications Upgrade to Outperform, price target $329. DETAILS JBHT:We reach our one-year price target of $329 (previously $192) by using our NTM+1 EPS estimate of $10.97 (previously $8.17) with a multiple of 30.0x (previously 23.5x). We are upgrading JBHT to Outperform and raising our price target to $329. The stock has rallied on better end market conditions,and with earnings geared to follow through an eventual peak in truck rates we would rather be late than on the sidelines. The entire JBHT business model is levered to contract truck rates (Exhibit 1) — and the rate environment is structurallychanging. This is not new news, and a lot of money is in the long truck rate trade, but the duration and rate of change are likely tobe longer and more significant than we have seen in prior cycles as supply constraints should prove durable. EXHIBIT 1:JBHT's business model is levered to contract truck rates J.B. Hunt — Earnings Leverage to Contract Truck Rates (lead-adjusted) Sensitivity of y/y segment EBIT change to the CASS contract-rate index OLS, 1Q16–1Q26; β = $M per +1 ppt; leads applied per segment (quarters CASS leads profit) Beta display basis (rate move):Assumption: express betas per +1.0 percentage-point (100 bps) move Note: Total (sum of segments) applies each segment's lead; the coincident single-series total (β 7.8, R² 0.80) assumes no lead.Best-fit leads: Intermodal ~1q, Dedicated ~4q; JBT/ICS/FMS near-coincident. Contract index (CASS); spot fits far worse. Contract truck rates are going up for a myriad of reasons, most notably: •Increased enforcement of existing rules and regulations that is removing non-compliant capacity from the marketplace. Thisincludes Electronic Logging Device mandates and limiting cheating, driver licensing and certification (language proficiencyetc.), a nd enforcement of cabotage rules. •Higher insurance rates due to nuclear verdicts and freight theft.•Changes in broker liability rules that make it more risky for brokers to use non-compliant capacity.•Higher fuel prices. These supply side constraints are increasing demand for compliant drivers adding to further cost pressure. While high rates(which mean higher wages for an owner / operator) are typically the best cure for high rates, increased enforcement of drivertraining, closure of non-compliant driver training schools, and tighter restrictions on Commercial Driver License issuanceare going to make it harder to replenish the driver pool. As the economic recovery broadens (hopefully), there could also beincreased competition for labor from relatively more attractive blue collar jobs that could exacerbate the current problem. Inflection in earnings power is significant, and lagged to the broader truck market. Times are good for JBHT now, they will getbetter as box turns improve in the broader intermodal market catalyzing rates to move higher. Intermodal unit economics remaindepressed relative to prior peaks, and should improve as JBHT leverages idle capacity and eventually realizes pricing gains. Theamount of excess cap