J.B.Hunt sees profits and rates fall

By Thomas Cullen

For J.B. Hunt, demand is increasing yet prices are falling and that is continuing to hit profits. For the third quarter 2024, operating revenue fell by 3% year-on-year to US$3.07bn whilst operating income was down 7% year-on-year at US$224.1m.

For the core Intermodal business, volume growth was quite good, with volumes overall increasing by 5%, transcontinental traffic up 7% whilst the company said that “demand was particularly strong on eastbound transcontinental loads out of Southern California which increased by a double digit percentage as compared to the prior year period”. However, the higher volume was offset by a 5% fall in gross revenue per load, with a fall in freight-rates being the main reason behind this. Stripping-out fuel surcharge saw underlying revenue fall by 2%. The consequences for profits were hard, with operating income down 13% year-on-year, with J.B. Hunt implying that rates had fallen more than this. Profits were supported by the “impact of absorbing network and equipment costs with higher volume”. Yet costs still seem to have been high, with wage costs increasing.

Dedicated Contract Services saw revenue fall by 5% and operating income fall by 7% year-on-year as the size of the fleet shrank and some costs rose. The brokerage business was worse-off, remaining loss making, although this moderated considerably, with a US$3.3m loss over the quarter compared to a $9.9m loss in Q3 2023. Revenue was down 7%. Gross profit was higher due to more effective purchasing and some costs were lower, although the costs of integrating brokerage business of BNSF Logistics did have a negative impact. The JBT Truckload business shrank, with revenue down 12% and operating income down 6%. J.B.Hunt seems to be trimming the size of the business to sustain profitability.

Even the ‘Final Mile Services’ suffered in the third quarter, with revenue down 3% and operating income down 7%. This was due to a “general weakness in demand across many of the end markets served”.

Although the stock market had seemed to expect worse, these results are somewhat dismal. A weakness in full load trucking is not unusual but rates in intermodal remain weak despite strong demand from the shipping container sector. It is unclear what can turn around what seems to be a surfeit of supply across much of the land-freight transport sector in the US.

Source: Ti Insight

Author: Thomas Cullen

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