J.B. Hunt (NYSE: JBH), which earned $1.37 per share in the second quarter, is going to take a hit of 26 cts per share in its third quarter earnings to be released next week due to several legal developments.
And the company presumably will talk about it on a conference call with investors, something it normally doesn't do.
Hunt, in a prepared statement, said it has received an arbitrators' Interim Award in an arbitration case with BNSF Railway. It would not reveal the details of the case or the award, which it said was confidential. "However, we are pleased with several determined components of the Interim Award," the company said in its statement.
But as a result of the award, J.B. Hunt said it would incur an $18.3 million pre-tax charge for BNSF-related issues going back to April 2014 through May of this year.
The dispute is not completely over. "While the parties disagree on the other financial implications from the Interim Award, we believe such implications will not be fully determined until the arbitrators issue additional (awards) following their review of each party’s requested additional submissions," the company said.
Its estimated hit of 26 cts per share will also be fueled by a previously-reported settlement with drivers, and a $2.6-million pre-tax charge because of an unidentified customer's bankruptcy.
"While we had previewed a 'sizeable miss' for JBHT in our 3Q preview note, this is clearly not what we had in mind," the transportation research team at Deutsche Bank, lead by Amit Merhotra, wrote in a note to investors. "Our caution was rather predicated on our expectation for lackluster intermodal volume growth and incremental margins, which is more critical to the mid-term outlook for shares than above-mentioned one-time charges. As such we’d expect a largely neutral reaction in today’s trading."
And in fact, the decline in J.B. Hunt stock at approximately 10:20 a.m. of a little more than 1% was in line with the performance of other truckload carriers and not significantly different from that of the S&P 500.
Merrill Lynch analyst Ken Hoexter indicated in a research note that the J.B. Hunt-BNSF dispute has been going on a long time. He described it as a '“multi-year” arbitration battle and said charge related to the dispute were taken as far back as 2005. That charge related to the split on revenue for the BNSF-Hunt intermodal relationship.
The research firm of CFRA has an estimated earnings per share on J.B. Hunt stock of $1.44 in the third quarter and $1.55 for the fourth quarter. Its buy recommendation came with this strong statement of support: "We look for stronger transportation demand and pricing improvement, along with market share gains over the next year to more than offset pressure on wages due to driver shortages," CFRA wrote in a recent research report. "We see JBHT adding to its container fleet in support of its rail partners that are expanding their networks. We see improving demand and pricing as a likely catalyst for the shares to outperform the market over the next year."
Whatever the numbers are, J.B. Hunt will be talking about it next Monday. In a break from recent practice, it will have an earnings call with investors. Such earnings calls are not mandated by law and several other leading trucking companies do not always have them after the release of quarterly earnings. But J.B. Hunt executives will take to the internet October 15 at 5:30 PM Eastern time to discuss their quarterly earnings. The earnings release on Monday is a day earlier than had been announced originally.