Not yet and we don’t know when.
That was the essential message on July 18 about a freight volume recovery from Darren Field, president of intermodal operations at J.B. Hunt Transport Services. Speaking to analysts after J.B. Hunt reported second-quarter profits that were down a quarter from the same time in 2022, Field said demand for intermodal services (which account for nearly half of J.B. Hunt’s revenue) remains “tempered” and that the company’s prices for upcoming work have been trending toward the lower end of management’s expectations as bid season has progressed.
But the leaders of the No. 4 carrier on the 2023 FleetOwner 500: Top For-Hire Fleets also passed along some potentially encouraging information: Field said some customers last month provided evidence that “the destocking trend has moderated,” and CEO John Roberts pointed out that intermodal volumes were down only 4% in June (versus 9% in April and 8% in May) on top of a 2022 growth rate of 10% in that month.
Still, Field was clear in managing expectations about an end to the freight recession.
“We’re still a little cautious on what we expect as the year goes on,” he said. “I don't want anybody to hear ‘green shoots.’ What I would say is last year, Q2 was the strongest volume [of the] year. And as we move forward, the comps get easier.”
Later during the earnings call, Field doubled down on the uncertainty aspect of where the market stands. Asked if the easier upcoming comparisons to 2022 would result in volume growth starting late this summer, he basically shrugged his shoulders after having noted earlier that most customer volume forecasts coming into this year turned out to be wrong.
“We’re still waiting to see if there will be any kind of a holiday shipping season,” Field said. “We’ll have to wait and see […] It just depends on what our customers are doing, what their sales are like. And unfortunately, I can’t really answer your question as we’re all waiting to find out the same answer.”
Arkansas-based J.B. Hunt produced a net profit of nearly $190 million on total operating revenue of $3.1 billion in the three months ended June 30. Those numbers were down 26% and 14%, respectively, from the same period last year. While leaders trimmed operating costs by more than $620 million—rents, purchased transportation and fuel spending accounted for nearly all of that change—the company’s operating margin slipped to 8.6% from 9.2% as wages, salaries, and benefits rose as a share of revenues despite dipping in absolute dollars from the year-ago quarter.
Given their cautious demand outlook, J.B. Hunt’s leaders have trimmed the high end of their capital spending forecast for the year to $1.8 billion from $2 billion. The floor of their range remains at $1.5 billion; capex in the first half of the year totaled $854 million versus $598 million in the same period of 2022.
“Some of this is timing-related, but also we are being prudent where it makes sense in the current environment,” CFO John Kuhlow said on the conference call.
J.B. Hunt’s Q2 numbers featured the following details in addition to intermodal’s 7% drop in loads handled and 13% fall in revenue per load:
- Revenue per load fell 24% in the company’s Integrated Capacity Solutions group that markets dry van, flatbed, and other services; and 21% in truckload, which continues to account for 6% of J.B. Hunt’s total sales.
- J.B. Hunt’s dedicated business limited revenue losses versus 2022 to less than 2%, bringing in $888 million and growing operating profits to $114 million compared to $94 million. Executive Vice President Brad Hicks said: “There seemed to be some firming or at least a bottoming out on spot rates towards the end of the quarter and we saw that reflected in our gross margin.”
- Another positive note came from final-mile services, which grew operating profit 12% to nearly $15 million despite seeing revenue slide by nearly 20% to $224 million. Executives said they are taking market share even while raising prices.
Perhaps hopefully focused on the green-shoots-no-green-shoots chatter and the strong dedicated numbers, investors slightly bid up shares of J.B. Hunt (Ticker: JBHT) to about $190.20 in pre-market trading July 19. Year to date, the stock has climbed nearly 10%, growing the company’s market capitalization to $20 billion.