J.B. Hunt vs. C.H. Robinson: Which Stock is a Better Buy the Dip Candidate?

Thanks to the COVID-19 pandemic-led supply and demand imbalance, most trucking operators worldwide witnessed solid freight demand. While high inflation and the Russia-Ukraine war led to high fuel prices, negatively affecting the trucking industry's near-term growth, the need for consumer goods is returning to its pre-pandemic levels. In addition, the trucking companies are also benefiting from the e-commerce boom. Moreover, rapid digitization, automation in logistics, and growing trucking services needs across sectors are expected to drive the growth of the trucking market. According to a Valuates Reports report, the global freight trucking market is expected to grow at a CAGR of 3% by 2027. Therefore, both J.B. Hunt Transport Services, Inc. (JBHT) and C.H. Robinson Worldwide, Inc. (CHRW) should benefit.

JBHT provides surface transportation, delivery, and logistic services in North America. It operates through five segments: Intermodal; Dedicated Contract Services; Integrated Capacity Solutions; Final Mile Services; and Truckload. CHRW provides freight transportation services and logistics solutions to companies worldwide.

Year-to-date, JBHT is trading down about 16% and CHRW has moved 5.5% lower.  Which of these two stocks is a better buy now? Let’s find out.

Latest Developments

On March 16, 2022, JBHT and BNSF Railway Company announced the launch of a joint effort to substantially improve capacity in the intermodal marketplace while also meeting the expanding needs of current customers. John Roberts, president and CEO of JBHT, said, "Together, J.B. Hunt and BNSF will enhance their work to bring back the consistency and reliability customers expect with intermodal services and further embrace intermodal conversion and transloading services."

On February 10, 2022, CHRW announced that its Board of Directors declared a regular quarterly cash dividend of $0.55 per share, payable on April 1, 2022, to shareholders of record on March 4, 2022. The company has distributed uninterrupted dividends without decline for more than twenty years.

Recent Financial Results

JBHT’s revenue increased 28% year-over-year to $3.50 billion for the fiscal fourth quarter ended December 31, 2021. The company’s operating income grew 55% year-over-year to $322.50 million, while its net earnings came in at $242.21 million, representing a 57.3% year-over-year increase. Also, its EPS came in at $2.28, up 58% year-over-year.

CHRW’s revenues increased 42.9% year-over-year to $6.50 billion for the fiscal fourth quarter ended December 31, 2021. The company’s income from operations grew 39% year-over-year to $287.40 million, while its net income came in at $230.10 million representing a 55.7% year-over-year increase. Also, its EPS came in at $1.74, up 61.1% year-over-year.

Past and Expected Financial Performance

JBHT’s revenue and EPS grew at CAGRs of 12.2% and 17.3%, respectively, over the past three years. Analysts expect JBHT’s revenue to increase 15.3% in fiscal 2022 and 5.9% in fiscal 2023. The company’s EPS is expected to grow 22.5% in fiscal 2022 and 11% in fiscal 2023. Moreover, its EPS is expected to grow at 29.8% per annum over the next five years.

On the other hand, CHRW’s revenue and EPS grew at CAGRs of 11.6% and 10.1%, respectively, over the past three years. The company’s revenue is expected to increase 5.4% in fiscal 2022 but decrease 6.2% in fiscal 2023. Its EPS is expected to grow 0.3% in fiscal 2022 but declined 8.1% in fiscal 2023. Also, CHRW’s EPS is expected to grow at a rate of 7.3% per annum over the next five years.

Profitability

CHRW’s trailing-12-month revenue is 1.90 times what JBHT generates. However, JBHT is more profitable, with a gross profit margin and net income margin of 16.62% and 6.25% compared to CHRW’s 6.96% and 3.65%, respectively.

However, CHRW’s ROE, ROA, and ROTC of 43.27%, 11.11%, and 17.90% are higher than JBHT’s 26.61%, 10.27%, and 15.12%, respectively.

Valuation

In terms of forward non-GAAP PEG, CHRW is currently trading at 1.48x, 29.8% higher than JBHT’s 1.14x. Moreover, CHRW’s forward EV/EBITDA ratio of 12.38x is 22.5% higher than JBHT’s 10.11x.

So, JBHT is relatively affordable here.

POWR Ratings

JBHT has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, CHRW has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

JBHT has a B grade for Growth and Sentiment, consistent with analysts’ expectations that its EPS and revenue will increase next year. On the other hand, CHRW has a C grade for Growth and a D grade for Sentiment, in sync with analysts’ expectations that its EPS and revenue will decline next year.

Of the 22 stocks in the A-rated Trucking Freight industry, JBHT is ranked #9. In comparison, CHRW is ranked #18.

Beyond what I’ve stated above, we have also rated the stocks for Value, Quality, Stability, and Momentum. Click here to view all the JBHT ratings. Also, get all the CHRW ratings here.

The Winner

The trucking industry is expected to grow exponentially with increasing demand this year and beyond. While both JBHT and CHRW are expected to gain, it is better to bet on JBHT now because of its lower valuation and better growth prospects.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Trucking Freight industry here.

JBHT shares rose $6.99 (+4.06%) in after-hours trading Thursday. Year-to-date, JBHT has declined -15.67%, versus a -7.54% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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