J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT)

#26 Intrinsic value, Stockscouter 7, Pitroski

looks like it will make a new high over the next few months. Shouldn't last in the long term will end up losing more buy this stock: risk/reward skewed toward the house.

JBHT continues to outperform their competition. They have continued to have many positive features on their balance sheet. Their PE ratio is within industry standards and continue to find new markets to emerge in.

benefiting from switching loads from road to rail; domestic containers grew 15% in fourth quarter in declining freight market; great operator with low costs

J.B. Hunt can service any transport need from raw to finished goods, all the way to your house. The company is structured to provide service that will allow a customer to operate efficiently for a competitive rate. J. B. Hunt has top of the line management, financially sound, diversified in the transportation industry, with a quality reputation and is partnered with great customers.

This isn't necessarily "overvalued" by a strict definition. Based on historical earnings and cash flows, I come up with a valuation around $29. However, from a long-term macroeconomic perspective, I am extremely bearish on the trucking industry.

There are several potential headaches developing for the trucking industry:

(1) Rising oil prices eat into trucking companies' profits like nothing else out there. Unfortunately, high oil prices are simply going to become a way of life over the next decade. Even with the greatest demand destruction event of most of our lifetimes, oil only fell to $35/barrel and that was DIRT CHEAP!!! Remember back in the '90s when $20/barrel oil seemed expensive? Those days are gone. The new paradigm will be a world where oil hovers around $70/barrel at the very least, and it will slowly rise over time.

(2) The American highway system is underfunded and being subsidized via general tax revenues. Meanwhile, the entire system is overburdened and states are dealing with record shortfalls. What's the solution? Either states are going to have to (a) raise gasoline taxes, (b) implement more tolls, or (c) let the highways decay. None of those options are winners for truckers.

(3) Rail is becoming more popular again and there will continue to be pressure from environmentalists (and a more green-conscious corporate world) to move towards shipping via rail over trucks, when the option is feasible. And since truck-based shipping is getting more expensive, corporate finance gurus will become more and more friendly to this idea.

All in all, I believe the long-term trends are very unfavorable for the trucking industry and I wouldn't want to invest in trucking companies under any circumstances. At $29, JB Hunt (JBHT) is near what-could-be a "fair valuation" point if you assume that they are able to earn what they did in FY '08 permanently (with a minimal 3% growth rate). Profits are already falling off a bit due to the economic crisis, so that valuation might be a bit on the aggressive side.

I can't say for certain how quickly any of these macroeconomic shifts will happen or how severe they will be, but I think around $29, the S&P 500 is a better bet than the JBHT.

diesel prices are rising, freight is decreasing.

One of the largest players in trucking - Only the best can survive in this economy

I love high gas prices. This drives small truckers out of biz, and gives greater market share to JBHT. JBHT has an ace in the hole - yes it is trucking, but it is also knee-deep in railways. If gas goes down, great that help too. It wins both ways.

betting a good earnings report. Smaller companies are getting squeezed out in favor of larger ones. Be interesting to see if JB is elbowing out the competition.

two sides of the story here:

1) massive insider selling + oil
2) strength of JBHT's intermodal distribution system

expect a big movement either way on july 14th earnings

we still need trucking, no matter what

I simply used the screener to identify 1-star companies with the highest 52-week gain. The 1-star rating should mean they are bad companies and the 52-week gain should mean they are overpriced. We’ll see how it works!

Trucking is an energy intensive industry which can be, in part, substituted by rail. Recent expansion of oil production by Saudi Arabia will be in the long run trivial and will not lead to any significant reduction in diesel costs. This is a tough industry to be in now. I'd expect some kind of shake out soon.

I listened to the CEO of YRC Worldwide, and he doesn't see know any transportation company can pass off enough costs to the consumer to remain in business with $5 fuel and $150 crude oil

I expect rising fuel prices to hurt all forms of transport, truckers especially (after only airlines).

Trucking is hurting and it is fairly high right now. Oil price will continue to hurt trucking.

They're going to struggle with high oil prices.

A recessions a coming this summer and high oil prices are not going away since the falling dollar is to blame, and continued inflation is not going to bring the value of the dollar up any time soon. Burnanke was not helping this country by bailing out the crust of American society. Also, Bush's stimulus package didn't help the upward inflationary pressure that is killing this countries middle class. Sorry about my rant but anyway my point is to sell trucking since rail is about to take over from the high price of fuel.