J.B. Hunt is more reliant on intermodal work as opposed to traditional trucking than many other companies in the industry, and as a result it has been recently been growing its earnings at a faster pace. When we look at five peers- Landstar System, Swift Transportation Co (NYSE:SWFT), Old Dominion Freight Line (NASDAQ:ODFL), Werner Enterprises, Inc. (NASDAQ:WERN), and Con Way Inc (NYSE:CNW)– only Old Dominion experienced more earnings growth in its most recent quarter compared to the same period in the previous year. Swift, Werner and Con Way had their net income decline by over 10%. However because of more confidence in J.B. Hunt’s business (and possibly because of its higher market cap as well) these companies’ trailing P/E multiples are between 12 and 18, placing J.B. Hunt at a substantial premium. Swift appears to be the outlier on the lower end of the valuation range: it carries trailing and forward P/Es of 12 and 9, respectively, and expectations of continued growth place it at a five-year PEG ratio of 0.5. We wouldn’t be too trusting of the Street, and as we’ve mentioned its earnings have been down recently, but it could still be worth looking at further. Of course, the fact that Old Dominion has been growing nicely and is cheaper than J.B. Hunt in terms of P/E multiples gets our attention as well. It trades at 17 times trailing earnings.
At this point, J.B. Hunt’s intermodal operations seem to provide it with a competitive advantage. However, it trades at a higher earnings multiple than other trucking related companies, and it’s possible that the market is overestimating intermodal by a bit. Swift and Old Dominion seem like possibilities for investors who are willing to dig through the industry for a better value.