The ongoing freight recession and its effect on prices knocked down the third-quarter profits of J.B. Hunt Transport Services Inc., executives said on Oct. 17.
In J.B. Hunt’s intermodal and dedicated units, which combined account for about three-quarters of the company’s top line, revenues fell 15% and 4%, respectively. And that’s with intermodal volumes climbing slightly in the quarter thanks to a steady progression from July to September: The last month of the quarter saw volumes rise 4% and featured the busiest week in the segment’s history. Unit president Darren Field said J.B. Hunt’s work with its rail partners is paying off in market-share gains.
Overall, Arkansas-based J.B. Hunt (No. 4 on the FleetOwner 500: Top For-Hire list) reported net income of $187 million on total operating revenues of nearly $3.2 billion. Both of those numbers were down from the same period last year, when profits were about 30% higher at $269 million and revenues topped $3.8 billion. Operating profits fell to nearly $242 million, which amounted to 7.6% of revenue versus 9.4% in the prior-year period.
Those numbers have the J.B. Hunt team facing the tricky task of keeping capacity on hand to meet customer needs while watching their costs climb relative to the revenue they’re collecting in a weak market that isn’t yet showing many signs of truly turning.
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“Our growth doesn’t always come neatly packaged,” CEO John Roberts said on a conference call with analysts. “As the next bit [of the] cycle comes around, we’re willing to talk to our customers about our cost challenges. Do we think volume can unlock efficiency? Absolutely. But as you’re ramping up rapidly, there will be some cost elements that creep in there that we’re going to have to battle.”
Analysts on the conference call repeatedly challenged Roberts, President Shelley Simpson, and their colleagues on J.B. Hunt’s commitment to making longer-term investments during a weak freight market. Simpson said today’s environment quite resembles that of the Great Recession of 2008 and 2009 and that the company’s leaders are looking to manage costs through the cycle while trying to push through price increases from their current lows. The near term, she added, remains uncertain.
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“We’re not experts on what’s going to happen in the economy,” Simpson said. “We don’t have customers [who are] negative. I would say they are neutral to positive. But I don’t know that anybody is an expert here as to what’s going to happen from an overall freight demand perspective. So it’s difficult for us to see what's happening moving forward.”
Shares of J.B. Hunt (Ticker: JBHT) were down almost 6% to about $184 in early trading Oct. 18. Over the past six months, they are still up slightly, leaving the company’s market capitalization at about $19 billion.
