Why Investors Were Hitting the Brakes on J.B. Hunt Stock This Week
Key Points
It didn't help that several analysts became more bearish on the logistics specialist's future.
Not every pundit became more negative, however.
It's rarely a good development when a top executive at a company makes a downbeat prediction about the business. This was the main reason why J.B. Hunt Transport Services (NASDAQ: JBHT) stock was decelerating so sharply over the past few trading days. The dynamic was exacerbated by a raft of analyst price target cuts.
As of Thursday night, J.B. Hunt's shares were down by more than 12%, according to data compiled by S&P Global Market Intelligence.
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Negative guidance
CFO Brad Delco made a stark admission at an investor conference early in the week -- J.B. Hunt now expects net earnings for its current (third) quarter to fall by 5% to 10% sequentially.
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That's based on rising diesel fuel costs, an important input, and higher driver expenses. In such situations, the company would pass along the additional costs to clients, however there is typically a delay.
Following this admission, several analysts tracking J.B. Hunt stock wasted little time cutting their price targets. Among the reducing parties were pundits at influential banks Wells Fargo and Bank of America Securities
Not everyone's a bear
However, those two researchers maintained their equivalents of buy recommendations. On top of that, other analysts saw some light in the apparent darkness of the third-quarter guidance. One, Jeff Kauffman of Citizens, went so far as to upgrade his J.B. Hunt recommendation to market outperform (buy, in other words) from market perform (hold). His price target is $300 per share.
According to reports, Kauffman harkened back to the company's impressive second-quarter earnings report in July. He also pointed out the temporary nature of the expected declines, which, before long, will be mitigated by surcharges, among other measures.
I'd agree that Mr. Market's reaction to the news was overblown, but I also believe those cost pressures might last longer than bulls like Kauffman think. With that in mind, I wouldn't get on board with this stock.
Wells Fargo is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.