Comparative Analysis of HUBG Versus JBHT

Institution Affiliation:

Comparative analysis of HUBG versus JBHT

Executive summary

The purpose of this research paper was to investigate the financialperformance of JB Hunt and Hub Group with industry leverages. Bothcompanies are from the United States of America, and they deal withtransport and logistics. Horizontal analysis was used to evaluate theincome statements of both companies. The paper used data from onlineresources, from the year 2012 to 2014. The financial key ratios werecalculated to investigate the companies’ performance. Liquidityratios, debt service ratios, efficiency ratios, leverage ratios andhorizontal analysis of income for JB Hunt and Hub group wereassessed. As per the outcomes of the liquidity proportions, Hub groupwas in a better position to meet its short-term obligations. Allother ratios strongly favored JB Hunt.

Businessanalysis

Hub group is one of the largest transport and freight managementcompanies in the United States of America. Company is also one of thelargest non-railroad providers of intermodal rail transport and iscontinually diversifying into other logistics solutions. Its fourmain services are the intermodal rail brokerage, logistics, truckbrokerage and mode transportation. Its largest customers are seas,Target Home Depot, and Wal-Mart. J.B. Hunt, a transportation company,based in Northwest Arkansas, is a trucking and transportation companythat has grown into being one of the leading trucking firms in theUnited States of America. Its two subsidiaries are ModeTransportation and Hub Group Trucking. The company is recognized forbeing the leader in the industry in technology and innovation.

Competitively, JB Hunt has a unique operating strategy that focuseson multiple businesses through its main business segments. It alsoedges out the main rivals by offering a full range of logisticservices to third party companies. Both companies use partnershipstrategies in business competition. The companies have over the yearsestablished formal relationships with several other logisticscompanies. For instance, since 1989, J.B. Hunt has been working withrailroad companies and is now collaborating with about four majorcarriers in the railroad transport industry. Additionally, accordingto J.B Hunt management, they find it necessary to compete withthird-party marketers such as Hub Group. This competition style,therefore, can be classified as a niche market approach.

In the transport a logistics business, some of the competitivefactors are value creation, innovation, company history, workforce,and safety. Value creation is determined by the delivery method of agiven company, and both companies have worked to develop continuouslyin this area. Innovation focuses on re-inventing the traditionaltransportation processes to fulfill customer’s need, while acompany’s history determines how the new customers perceive it. Theworkforce helps a given company in the logistics industry to focus onits values and purpose while safety is a priceless determinant ofindustrial success in transportation. Given these factors and thelow-cost dominance, J.B Hunt comes from the Hub Group as the superiorbrand.

Financialanalysis

J.B Hunt’s and Hub Groups’ financial statements for the past twoyears reused for the purpose of performing ration analysis and incomestatement analysis. The values were obtained from online databases(Yahoo Finance, 2015).

JBHunt Transport Services Inc. Income Statement Analysis

JB Hunt

2013

2014

Increase (%)

Decrease (%)

Industry Averages (%)

&nbsp

&nbsp

&nbsp

&nbsp

&nbsp

2013-14

Revenue

1601156

1474276

8.606258

&nbsp

12.54

Gross Margin

&nbsp63037

56849

10.88498

&nbsp

11.65

Operating Margin

172100

153533

12.09317

&nbsp

9.54

Net Profit Margin

&nbsp589678

&nbsp533945

10.43797

&nbsp

15.69

Incomestatement analysis

This analysis is used by in finance to assess the performance of themain elements in an income statement. A company’s income statementcan be used to find facts about its performance and growth. The twomain approaches used are horizontal analysis and vertical analysis.For the purpose of this paper, the horizontal analysis approach wasemployed. This analysis is the comparison of historical financialinformation over a series of periods. This was used to measure theperformance of J.B Hunt Transportation Company and Hub Group, byutilizing their publicly announced income statements by evaluatinginformation for 2013 and 2014. The objective of carrying out thehorizontal analysis was to see if any figures were on the extremesi.e. oddly low or high in relationship to the available data. In thisresearch paper, the changes in revenue, gross margin, operatingmargin and net profit for the two companies were evaluated. Therevenue for JB Hunt increased to 8.61% between 2013 and 2014. Thecompany’s gross margin also increased to 10.88% from 2013 to 2014.The operating margin also increased to 12.09% from 2013 to 2014 forJB Hunt, and the net profit margin also increased 12.09% from 2013 to2014 for the company. The industry leverage was calculated by takingaverage of four competitors in the Logistics industry. JB Hunt’soverall performance was a little lower than the industry leverages.In order to perform better, the company needs to improve on some ofits sectors.

Table1: “Courtesy of Bloomberg Business (2015).”

Hub Group

2013

2014

Increase (%)

Decrease (%)

Industry Averages (%)

&nbsp

&nbsp

&nbsp

&nbsp

&nbsp

2013-14

Revenue

3373

3571

5.87

&nbsp

12.54

Gross Margin

312.5

356.1

13.95

&nbsp

11.65

Operating Margin

96.2

112.4

16.884

&nbsp

9.54

Net Profit Margin

58.2

68.0

16.84

&nbsp

15.69

The revenue for Hub Group increased 5.87% between 2013 and 2014. Thisincrease, however, is not significant. The gross margin increased to13.95% between 2013 and 2014 for Hub Group. As compared to theindustry leverage, this increase is quite significant. The operatingmargins also increased by 16.88 percent from 2013 to 2014. The netprofit margin also increased by the same figure from 2013 to 2014.When comparing the two companies, the overall horizontal analysis forHub Group is far much better than the overall horizontal analysis forJB Hunt during the period 2013 to 2014. The industry leverage hasalso been calculated by taking the average of the main competitors.The performance of Hub Group has been impressive during that periodhowever, it may need to improve in some areas given the industrialcompetition.

Ratioanalysis

Efficiencyof assets utilization

JB Hunt

Hub Group

Industry leverage

Efficiency and usage ratios

2012

2013

2012

2013

2013

Return on assets

12.96

13.12

7.71

7.02

22.45

Return on equity

45.66

37.95

14.46

13.01

25.35

Asset turnover

13.12

12.96

3.55

3.43

12.35

A/R turnover

23.34

22.31

13.90

12.54

16.47

A/P turnover

27.25

15.7

11.4

11.0

13.54

Thedata for both companies was obtained from the Morning StarFinancials (Morning Star, 2015).

The efficiency ratios are typically for analyzing how well or badly acompany utilizes its assets and liabilities. Regardless of the natureof business that is involved, a company must invest in assets toperform its operations. For the purposes of this paper, the ratiosthat were used return on assets, return on equity, asset turnover,A/R turnover, and A/P turnover. The accounts receivable turnoverratio measures the effectiveness of a company’s credit policies. Alow figure in this ratio means that the company is giving out credittoo easily, or it may be having problems collecting its grants. Thismeans that a high figure is appropriate. The significance of theaccounts payable turnover is in measuring how the company pays itsbills. Finally, the total assets turnover is an efficiency ratio thathighlights how effective management is at using short term and longterm assets.

Thereturn assets ratio for Hub Group is lower than that of JB Hunt. Thisimplies that the latter is using their assets in a more efficientmanner that the former. The return on equity for JB Hunt is wayhigher than the return on equity for The Hub Group for the twofinancial years. This means that JB Hunt used their equity to make aprofit in a more efficient way than the Hub Group. Given that theasset turnover for JB Hunt is higher than that of Hub Group, theformer is more efficient in recovering account receivables ascompared to the latter. This means that JB Hunt achieves higher andfaster accounts receivable efficiency. One explanation for thefigures of accounts payable turnover for both companies is that theydelay their accounts payables to settle operational activities andother logistics. The efficiency usage levels for JB Hunt are morefavorable than those of Hub Group for the years 2012 and 2013. Theindustry leverages were calculated by taking the averages of theleading companies in the trucking, transport and logistics industry.The performance of JB Hunt is closer to the industry averages whilethe performance of Hub Group is not. This means that the latter needsto improve its efficiency figures to compete with the industryleverages.

Liquidityrisk

The liquidity ratios are calculated to assess a company’s’capability to satisfy their short term targets. Short-term assets areused for this calculation. These are the current liabilities that acompany has. If a company’s current ratio is more than one, itmeans that it is capable of meeting its short-term obligations. Forboth companies, the current ratio was calculated as the companies’total assets excluding inventory. Guru Focus (2015) shows that as ofSeptember 2014, JB Hunt’s quick ratio was at, which means the firmcould not offset its liabilities fully. Over the past 13 years, thecompany’s highest quick ratio was 1.76. The lowest was 0.75, andthe median has been calculated to be 1.06.

“Current Ratio” (A: Sep. 2014 )

=

“Total Current Assets”&nbsp(Q: Sep. 2014 )

/

“Total Current Liabilities&nbsp(Q: Sep. 2014 )

=

680.203-26.248

/

712.296

=

0.92

As per the last quarter of the year 2014, Hub group’s quick ratiowas 1.49 This figure indicates that it has good short-term financialstrength. Over the past 13 years, the company’s highest ratio was2.02, and the lowest was 0.93. The median was 1.17 (Guru Focus,2015).

“Current Ratio” (Q: Sep. 2014 )

=

“Total Current Assets&nbsp(Q: Sep. 2014 )

/

“Total Current Liabilities&nbsp(Q: Sep. 2014 )

=

443.111714507

/

297.711404189

=

1.49

The “quick ratio” is more conformist than the “current ratio”,mainly because it does not take into consideration inventories fromcurrent assets, which means that companies with higher “quick ratioare in a better liquidity position.

Leverage

JB Hunt

Hub Group

Industry leverage

Debt ratio

2013

2014

2013

2014

2014

Financial leverage

1.78

2.03

1.46

1.99

22.45

Debt ratio

0.866

0.775

0.017

0.153

0.28

Leveragedata courtesy of Y Charts (2014)

The leverage ratios are calculated to help assess the sources throughwhich a company has decided to finance and calculate its payingcapacity to the equity holders and financing for their respectivecreditors. In some calculations, the leverages can include interestexpenses, debt ratio and financial leverage for the company. Havinginformation about the financial leverage helps the company to tellthe levels to which it can use borrowed money for business purposes.Bankruptcy is one of the major risks posed by such money, meaningthat high financial ratios are not healthy for business operations.However, high financial leverages may have some positive effects onthe company. When a company has high financial leverages, there arepositive tax effects for the company, and return on investments forthe shareholders increases.

Accordingto the information about the two companies’ leverages, the figuresfor Hub group are slightly lower than those for JB Hunt for the years2013 and 2014. This means that Hub Group uses less debt for theirdaily operation, while JB Hunt uses more debt to run their businessoperations. The debt ratio figures represent the combination of debtfinancing and equity financing for the two transportation companies.The debt ratio for Hub group is lower than that of JB group. For bothcompanies, debt ratio is closer to the industry average, which iscalculated by using the leading companies in the industry.

Debtservices coverage

JB Hunt

Hub Group

Industry leverage

Debt services ratio

2013

2014

2013

2014

2014

Interest coverage ratio

24.85

25.65

Long-term debt

458.42

752.21

180.56

235.4

845.35

The purpose of calculating the debt service ratio is to assess acompany’s capability to settle their interest expenses. A number ofdebt service ratios can be used to calculate this. By using earningsand operating cash flow, a company can assess its capacity to pay itslong-term debts. High the interest ratios mean good for businessoperations. Some of the data necessary for all calculations wasmissing from the online sources. The interest coverage ratio for JBHunt is better than Hub group. According to the information, JB Huntis in a better position to pay its long-term interests than Hubgroup. Both companies’ performance has been lower than the industryleverages, and they need to improve their capability to gain a bettercompetitive position in the industry.

Conclusion

The research project used different ratio analysis for JB Hunt andHub group. The information was interpreted, and the comparisonsdiscussed succinctly. A horizontal analysis was conducted on the twocompanies’ income statements. All the data was collected fromonline resources. Since some information was missing, the years thatwere considered were from 2012-2014. Hub group had a strongerliquidity position to meet its short-term obligations than JB Hunt.The debt services ratio however suggested that JB Hunt group was in abetter position to meet its interest expenses than Hub group.Additionally, the leverage ratio suggests that the portion of thedebt in financing structure of JB Hunt is less than Hub group. Theefficiency ratios show that JB Hunt used its assets and equity betterthan Hub group. Overall, the performance of JB Hunt was much betterthan that of Hub Group for the years investigated.

References

Bloomberg Business. (2015). Hub Group Inc-CI A. Retrieved on19 February 2015 from:http://www.bloomberg.com/research/stocks/financials/financials.asp?ticker=HUBG

Guru Focus (2015). JB Hunt Group Transport Services Inc. Retrievedon 19 February 2015 from:http://www.gurufocus.com/term/quick_ratio/JBHT/Quick%2BRatio/JB%2BHunt%2BTransport%2BServices%2BInc

Morning Star. (2015). JB Hunt Transport Services Inc. Retrievedon 19 February 2015 from:http://financials.morningstar.com/ratios/r.html?t=JBHT

Nasdaq (2015). JB Hunt transport services, Inc. Stock report.Retrieved on 19 February 2015 from:http://www.nasdaq.com/symbol/jbht/stock-report

Y Charts (2014). Transport Debt to equity ratio (Quarterly).Retrieved on 19 February 2015 from:http://ycharts.com/companies/JBHT/debt_equity_ratio

Yahoo Finance. (2015). Income Statement. Retrieved on 19February 2015 from: http://finance.yahoo.com/q/is?s=jbht

Related Posts

© All Right Reserved