J.B. Hunt Transport Services reported a mixed fourth-quarter performance on Thursday, with earnings per share of $1.53, falling short of the consensus estimate of $1.62. Despite the miss, the company noted strong peak season performance in its intermodal and highway services segments, with signs of improving customer behavior, such as securing capacity earlier than usual.
The Lowell, Arkansas-based transportation provider saw a 5% year-over-year decline in consolidated revenue, which totaled $3.15 billion. Adjusted operating income, excluding a $16 million intangible asset impairment charge, dropped by 13% to $223 million. The company anticipates a 20% to 25% sequential decline in operating income for the first quarter, consistent with historical seasonal trends, excluding the pandemic years.
These results, combined with the soft guidance for the first quarter, led to an 11.1% drop in J.B. Hunt’s stock price in after-hours trading.
In the intermodal segment, revenue decreased by 2% year-over-year to $1.6 billion, despite a 5% increase in loads. Revenue per load declined by 6%, or 3% excluding fuel surcharges. The company noted record volumes, with transcontinental moves rising 4% and Eastern loads up 6%. However, it continues to face competitive pressure from low truck rates, which impacted revenue growth. Total intermodal traffic on U.S. Class I railroads grew by 9% year-over-year in the quarter, according to the Association of American Railroads.
The intermodal unit’s operating ratio (OR), a measure of operational efficiency, worsened by 170 basis points year-over-year to 92.7%, reflecting higher costs from increased volumes, repositioning equipment, and the addition of 800 intermodal drivers for the peak season. Rail service at partner BNSF did suffer early in the quarter, which impacted margins, although management emphasized that these service issues were linked to record volumes rather than structural problems.
J.B. Hunt’s dedicated segment saw a 5% drop in revenue to $839 million, driven by a 4% reduction in average trucks in service and a 1% decline in revenue per truck per week. Despite adding 440 new trucks in the quarter, the fleet additions lagged behind customer attrition. The segment’s operating ratio worsened by 120 basis points year-over-year to 89.2%, though it remained in line with the company’s long-term target for its matured business.
The brokerage segment faced the most significant challenges, with revenue plunging 15% to $308 million. This decline was primarily driven by a 22% drop in loads, offset slightly by a 9% increase in revenue per load. Despite cost-cutting efforts, including reducing headcount by over 30%, the brokerage unit posted an operating loss of $21.8 million, or a $5.8 million loss excluding asset impairment charges. The company had incurred $35 million in integration and impairment costs related to its acquisition of BNSF Logistics’ brokerage operations, but expects these costs to dissipate in the coming year.
Looking ahead, J.B. Hunt expects to reduce operating costs tied to excess capacity in its intermodal and truckload units, with the current figure down from $100 million to $60 million.
In summary, while J.B. Hunt’s peak season performance showed some promise, ongoing challenges from competitive pressures, higher operational costs, and weaker-than-expected brokerage results led to a disappointing quarter. The company’s forecast of a decline in operating income for the first quarter of 2025 underscores the ongoing challenges it faces.
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