Comparative Financial Statements Analysis of JBHT and HUBG

ComparativeFinancial Statements Analysis of JBHT and HUBG

ComparativeFinancial Statements Analysis of JBHT and HUBG

Abstract

Financialstatements provide important information about financial activitiesof a business. If presented in structured manners, financialstatements allow stakeholders to understand the financial positionand the financial performance or variations of an entity. Thus, it isimportant to provide a comparative analysis of financial statementsfrom different companies, but operating in the same industry tounderstand the purpose of these statements, as well as, how they showthe performance of a company. This research examines the financialstatements of Hub Group (HUBG) and J.B. Hunt (JBHT) using balancesheets and income statements. Moreover, the research uses leverage,efficiency, debt service, and liquidity ratios to compare thecompanies’ financial changes and performance. According to thefinancial analysis and the ratios assessments, J.B. Hunt is in abetter financial position than Hub Group, although HUB Group isstrongly positioned to meet its short-term responsibilities.

JBHT provides delivery and surface transportation services acrossAmerica, Mexico, and Canada. The company operates through fourdivisions: “Truck (JBT), Intermodal (JBI), Integrated CapacitySolutions (ICS), and Dedicated Contract Services (DCS),” (Slack,2016). These segments allow the firm to provide a full variety oftransport and logistic services to consumers and third party firms.Moreover, the company partners with other firms to provide itsservices, for example, the company partners with railroad companiesand logistic firms to provide logistic services. Today, the firm hasdeveloped into one of the largest transportation firms in Americawith roughly 21,000 employees and yearly revenues amounting toroughly US$6 billion (NASDAQ, 2016b). Hub Group also offers freightand transport services through its segments: logistics, modetransportation, truck brokerage, and rail brokerage. The company hasan employee capacity of roughly 2,600 employees and a yearly incomeof around US$3.5 billion (NASDAQ, 2016a). J.B. Hunt boasts of a largecustomer base than HUBG, a fact supported by its vast number ofemployees and the amount of revenue compared to HUBG. Moreover, thecompany has a better value creation structure, innovation, safety,low-cost dominance, and history compared to HUBG.

Financialanalysis

From the provided balance sheet, J.B. Hunt had total assets of$3,636,567, $3,378,468, and $2,819,404 total liabilities stood at$2,336,215, $2,173,963, and $1,806,952 while equity stood at$1,300,352, $1,204,523, and $1,012,452 for the period 2015, 2014, and2013 (NASDAQ, 2016b). On the other hand, Hub Group had total assetsof $1,301,146, $1,212,127, and $1,047,943 total liabilities stood at$653,306, $611,343, and $486,416 while equity stood at $647,840,$600,784, and $561,527 for the period 2015, 2014, and 2013 (NASDAQ,2016a). The data shows that J.B. Hunt had more assets, liabilities,and equity than Hub Group, which shows that the company is biggerthan Hub Group. It also means that the company is in a betterposition to generate more revenue and profit, as well as, engage inmore and diverse business activities than Hub.

Table 1

Incomestatement analysis for Hub Group

Hub Group

2013 (values in 000`s)

2014 (values in 000`s)

2015 (values in 000’s)

&nbsp

&nbsp

&nbsp

Revenue

3373

3571

3525

Gross Profit

371

370

412

Operating income

113

83

117

Net income

69

51

70

Table 2

Incomestatement analysis for J.B. Hunt

J.B Hunt

2013 (values in 000`s)

2014 (values in 000`s)

2015 (values in 000’s)

&nbsp

&nbsp

&nbsp

Revenue

5584

6165

6187

Gross Profit

2013

2267

2522

Operating income

576

631

715

Net income

342

374

427

The tables provide Hub Group and J.B Hunt’s financial statementsfor the past three years reprocessed for the objective of carryingout ratio analysis and income statement assessments. The figures wereobtained from NASDAQ Stock Exchange website. Financial assessorsutilize income statements’ analysis to scrutinize the main elementsof a firm’s performance such as the revenue collected and theincome made. The study used horizontal analysis as it provides andcompares financial data over a sequence of periods, in this, scenario3 years for both companies. The study utilized publicly announcedincome statements from the firms as shown in NASDAQ website for theperiod between 2013 and 2015. From the data provided, J.B. Huntrealized higher revenues for the 3 years than Hub Group. The companyrealized total revenues of $5,584,571, $6,165,441, and $6,187,646 forthe periods 2013, 2014, and 2015 compared to Hub Group, whichrealized revenues of $3,373,898, $3,571,126, and $3,525,595 for thesame period (NASDAQ, 2016a) NASDAQ, 2016b). Both companies realizedgrowth in revenue, income, and profit, which means that during the3-year period, they had improved financial performance. However, asattested by the income statements, J.B. Hunt had a better financialperformance than Hub Group. Moreover, Hub Group realized decreasedprofits in 2014, as although it realized increased revenues, its costof goods increased. It means that Hub Group failed to manage properlythe costs associated with revenue such as labor costs, marketingactivities, and increased prices of gasoline.

Table 3

Liquidity andprofitability ratios

J.B. Hunt

Hub Group

Liquidity and profitability ratios

2013 (in percentage)

2014 (in percentage)

2015 (in percentage)

2013 (in percentage)

2014 (in percentage)

2015 (in percentage)

Liquidity

Current ratio

95

112

161

151

159

174

Quick ratio

92

108

157

151

159

174

Cash ratio

1

1

1

21

31

58

Profitability

Gross margin

36

37

41

11

10

12

Operating margin

10

10

12

3

2

3

Pre-tax margin

10

10

11

3

2

3

Profit margin

6

6

7

2

1

2

Pre-tax ROE

55

50

53

20

14

17

After tax ROE

34

31

33

12

9

11

Liquidityratios

The current ratio measures a firm’s capacity to pay its obligationsboth short and long term. Both firms had current ratios over 90% forthe three periods under review, but Hub Group had a higher currentratio for all the three periods than J.B. Hunt. J.B. Hunt had ratiosof 0.95, 1.12, and 1.61 while Hub Group had ratios of 1.51, 1.59, and1.74 in 2013, 2014, and 2015 respectively (NASDAQ, 2016b NASDAQ,2016a). XXX asserts that a ratio over 1 indicates that a firm hasgreater assets than liabilities while a value under I indicates thatthe liabilities are more than the assets. Moreover, a value under 1indicates that a company is in a better position to pay itsobligations when they are due. This means that during 2013, J.B. Huntwas not in a good financial position, but the position increased inthe subsequent years.

A quick ratio assesses a firm’s liquidity by comparing the accountsreceivable, cash, and marketable securities to current liabilities(Demerjian, Donovan, &amp Larson, 2016). A value greater than 1means that a company can pay back its current liabilities fully. Bothcompanies realized increased quick ratios for the period under reviewalthough J.B. Hunt had a quick ratio of less than 1 during 2013,which means that it could not fully pay its current liabilities. Onthe other hand, a cash ratio also assesses a company’s ability topay back its current liabilities, but it looks at the most liquidassets of a firm. Thus, the cash ratio is not a good indicator of afirm’s performance.

Profitabilityratios

The gross margin ratio compares a firm’s revenue to its cost ofgoods thus, it shows the proportion of overall sales income that thefirm retains after sustaining costs. In this regards, a higher ratioshows that a company is making a decent profit from the sale of itsgoods (Demerjian et al., 2016). According to NASDAQ (2016b) (2016a),J.B. Hunt, had a gross margin ratio of 36%, 37%, and 41% respectivelywhile Hub Group had a ratio of 11%, 10%, and 12%, which means thatJ.B. Hunt retained a higher proportion of revenue than Hub Group did.The operating margin, profit margin, and pre-tax margin ratios ofboth companies increased over the period. However, J.B. Hunt hadhigher ratios than Hub Group, which means that the company was in abetter financial position than Hub Group. The return on equity (ROE)refers to the sum of disposable income reimbursed as a proportion ofstockholders’ equity. Thus, it assesses a firm’s profitability byshowing the quantity of return a firm makes with the amount investedby the shareholders. J.B. Hunt realized a greater ROE before andafter tax in 2013 (55% and 34%), but the ratio decreased in 2014 to50% and 33% before and after tax while it increased in 2015 to 53%and 33%. Hub Group had a ROE ratio of 20% and 12% in 2013, whichdecreased to 14% and 9% in 2014 and then increased to 17% and 11% in2015 (NASDAQ, 2016a). This shows that J.B. Hunt used theshareholders’ money more effectively than Hub Group, but bothgroups had issues in 2014 when they realized decreased values.

Conclusion

From the provided data, it is essential to note that although bothfirms are in the same industry, they differ greatly in terms ofprofitability, assets, and revenue. In 2015, J.B. Hunt had totalassets of $3,636,567, total liabilities of $2,336,215, and equity of$1,300,352, while Hub Group had total assets of $1,301,146, totalliabilities of $653,306, and equity of $647,840 (NASDAQ, 2016aNASDAQ, 2016a). However, J.B. Hunt in the same period generated arevenue of $6 million, gross profits of $2.5 million and a net incomeof $427 thousands while Hub Group generated a revenue of $3 million,gross profit of $412 thousands, and a net income of $70 thousands.This shows that J.B. Hunt has identified strong means of revenuegeneration than Hub Group, as well as, used its assets and equitymore efficiently to generate more profits. A comparison of therevenue generated and the gross profit realized means that J.B. Huntis in a better financial position than Hub Group. As such, Hub Groupneeds to develop innovative systems, collaborate more with thirdparty firms, and attempt to focus on businesses than generateprofits. Both companies should employ innovative ways of recoveringthe money owed, consolidate their debts, employ advanced marketingtechniques, and sell some of the unused assets, for example, unusedtrucks. For Hub Group it should attempt to reduce its costs sincethey contributed greatly to the reduced gross profits compared to therevenue generated.

References

Demerjian, P. R., Donovan, J., &amp Larson, C. R. (2016). Fair valueaccounting and debt contracting: Evidence from adoption of SFAS159.&nbspJournal of Accounting Research.

NASDAQ. (2016a). HUBG Company financials. Retrieved 26June 2016 from http://www.nasdaq.com/symbol/hubg/financials

NASDAQ. (2016b). JBHT Company Financials. Retrieved 26 June 2016 fromhttp://www.nasdaq.com/symbol/jbht/financials

Slack, B. (2016). Intermodal transportation.&nbspSustainableRailway Futures: Issues and Challenges, 219.

Appendices

Financialstatements for Hub Group and J.B. Hunt between 2012 and 2015

Table 4

Annual IncomeStatements for Hub Group

Source(http://www.nasdaq.com/symbol/hubg/financials?query=income-statement)

Table 5

Annual BalanceSheet for Hub Group

Source(http://www.nasdaq.com/symbol/hubg/financials?query=balance-sheet)

Table 6

FinancialRatios for Hub Group

Source(http://www.nasdaq.com/symbol/hubg/financials?query=ratios)

Table 7

Incomestatements for J.B. Hunt

Source(http://www.nasdaq.com/symbol/jbht/financials)

Table 8

Balance sheet forJ.B. Hunt

Source(http://www.nasdaq.com/symbol/jbht/financials?query=balance-sheet)

Table 9

Financialratios for J.B. Hunt

Source(http://www.nasdaq.com/symbol/jbht/financials?query=ratios)