In short: Citizens upgrades to Outperform; Terranova (holder, $271 for his ETF) still says wait (32:04). 60% of analysts rate it Buy, 12-month target $305, but "if you don't own it, I don't think you step in and buy it. I think you need to see it stabilize" — rising diesel and driver costs cut guidance 5–10% and "this could be the beginning of what we hear in the earnings season from many other companies." Simpson: $6 diesel "percolates through the entire system."
J.B. Hunt is a big trucking and freight company whose costs jump when diesel does. An analyst upgraded it today, but Terranova, who owns it, says new buyers should wait until the stock stops falling, because record diesel prices are cutting profits — and he thinks other companies will report the same problem this earnings season.
In short: The named casualty of record diesel: said late Tuesday that soaring diesel and other costs will cut Q3 profit 5–10% versus Q2; CFO Brad Delco cited "some of the most radical and abnormal swings in fuel prices." Shares −13% Wednesday.
J.B. Hunt is one of the largest U.S. trucking and freight companies — it moves goods by truck and, in partnership with railroads, in containers that switch between trains and trucks. Trucks run on diesel, so fuel is one of its biggest costs. Trucking companies usually pass fuel costs on to customers through "fuel surcharges," but those adjust with a lag; when diesel jumps as fast as it has (86 cents in a month), the company pays the higher price before it can bill for it.
That is what happened: J.B. Hunt told investors that diesel and other costs will cut its third-quarter profit by 5% to 10% compared with the second quarter, with its CFO calling the fuel swings some of the most abnormal the company has seen. The stock fell 13% in a day. The negative view is that as long as diesel keeps rising — forecasters see $7 in some states — fuel-heavy businesses keep absorbing costs they can only recover later. An export ban that kept more diesel at home could ease U.S. prices, but producers warn it could backfire by reducing supply over time.
In short: Terranova holds it (bought end of July at $271 for his ETF) but won't add. "$6 diesel we need to bookmark today and revisit it. Is this the beginning of hearing the story about earnings degradation across the board attributable to rising energy costs?" The CFO's 5–10% earnings cut on diesel and driver costs is "troubling… I don't advocate stepping in here and buying it. I think you need stability."
J.B. Hunt is one of the largest US trucking and freight companies. Its trucks burn diesel, which has hit record prices, and it told investors that fuel and driver costs will cut this quarter's profit by 5–10%. The stock fell hard. Terranova still owns it but won't buy more until things stabilize, and he is treating the warning as a possible first sign that high energy costs will start eating into profits across many industries.
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