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No-passing zone: J. B. Hunt Transportation is moving at a clip that won't allow other truckload carriers to overtake it.

No-Passing Zone J.B. Hunt Transportation Is Moving At A Clip That Won't Allow Other Truckload Carriers To Overtake It

The new 150,000-SF home for J.B. Hunt Transportation Services in Lowell will be without one feature that set its old headquarters apart from other trucking companies: a putting green in the waiting room. Minus this conversation piece, the largest truckload carrier of general freight still has plenty to talk about heading into its new digs and the 1990s.

One of J.B. Hunt's goals, so stated in its 1988 annual report, is to achieve an annual revenue growth of 30 percent. As of Sept. 30, 1989, the company had tallied revenues of $377.22 million. It'll take a $133 million performance in the fourth quarter to make that 30 percent goal.

"If they don't hit it, they'll be damn close," reports Ginanne Long, analyst with Stephens Inc.

The company is backing off its goal of reaching $1 billion in total revenues by 1992. It would take three more consecutive years of 30 percent growth to realize that milestone. Such an increase hasn't been a historical problem for J.B. Hunt, which has turned in 30 percent-plus revenue growth figures consistently during the 1980s. But the company has modified its strategy heading into the new decade.

"We have a more conservative growth plan in 1990," reveals Kirk Thompson, president and CEO of J.B. Hunt. "It may take a little longer to reach $1 billion than we had hoped."

After setting a blistering pace of revenue growth during the first decade of deregulation, J.B. Hunt will be shifting gears. Beginning next year, the company will be putting more of an emphasis on earnings growth.

"In 1990, I don't think they will [hit 30 percent revenue growth], and part of that is due to the decision of not to expand the fleet but to cut margins and build equity," Long remarks.

Overall, revenues increased 400 percent from 1984 through 1988 ($97.95 million to $392.55 million), and earnings grew by 233 percent ($14.14 million to $33.04 million) during the same period.

Competitors like M.S. Carriers in Memphis, Werner Enterprises in Omaha, Neb., and Builders Transport in Camden, S.C., have been unable to match that pace. M.S. Carriers achieved 365 percent revenue growth ($18.76 million to $68.48 million) in 1984-88. Werner Enterprises and Builders Transport had respective revenue increases of 358 percent ($53.48 million to $191.44 million) and 258 percent ($79.03 million to $203.86 million) during the same period.

M.S. Carriers and Werner have surpassed J.B. Hunt in terms of earnings growth for the five-year period. Earnings increased 385 percent at M.S. Carriers and 361 percent at Werner compared to J.B. Hunt's 233 percent.

With next year's plans slower revenue growth (read: less capital investment for fleet expansion), the company stands to enjoy more profits from the marketshare it has carved for itself during the '80s.

According to Thompson, J.B. Hunt intends to produce a 15-20 percent increase over 1989 earnings. If the company reaches $30 million in earnings as expected, that figure should land between $34.5 million and $36 million.

"To me, that's a sign of good management," says David Gutherie, VP of research at Morgan Keegan & Co. in Memphis. "You grow fast when you can and when you can't you watch your costs. Both objectively and subjectively, J.B. Hunt has one of the best management teams in the industry."

The company recently announced a transportation alliance with a traditional competitor to the trucking industry: railroad. The joint venture with Santa Fe Railway has been described as a breakthrough development that will likely be duplicated in other segments of the transportation industry.

"I'm surprised frankly not to have seen this sooner," Gutherie says. "It makes sense for everyone. If it's done right, they all three benefit - railroad, trucker and shipper."

"I don't know if it'll be a massive trend, but as opportunities for intermodal alliances present themselves, you'll see more of it," Thompson states.

The Santa Fe-J.B. Hunt alliance is estimated to produce up to $90 million annually for the two companies. The initial target routes are southern California to eastern Michigan and central Ohio. Santa Fe provides the long-haul service which J.B. Hunt delivers and picks up on either end of the shipment.

This development can be viewed as an extension of the core carrier concept, in which shippers rely on a small number of proven carriers for service. The concept is likely to become more prevalent as the consolidation and shakeout of the trucking industry continues into the 1990s.

"If you had 100 trucks, I doubt if you could call on someone like P & G [Proctor & Gamble]," Thompson says. "That wasn't the case a few years ago."

"We continue to see people consolidating and dropping out," echoes Gutherie of Morgan Keegan. "You've seen the same thing in the LTL [less-than-truckload] business. It's just a matter of how much long the process will last.

"The good ones will get bigger and prosper, and the other ones will disappear. Among the public companies, there will be no larger truckload carrier than J.B. Hunt for the foreseeable future."

With J.B. Hunt's track record, other truckers will be chasing it into the next century as the company continues to create a no-passing zone for the competition. [Tabular data Omitted]
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Author:Waldon, George
Publication:Arkansas Business
Date:Dec 18, 1989
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