JB Hunt Transport Services said it had a strong peak season across its intermodal and motorway services, with some customers receiving capacity earlier than normal, which is often a harbinger of improving conditions.
After the close on Thursday, the Lowell, Arkansas-based intermodal transportation provider reported earnings of $1.53 per share. Results included a headwind of approximately 13 cents, or $16 million, from impairments on intangible assets. The consensus estimate for the period was pegged at $1.62 per share, in line with the company's performance net of expenses.
Consolidated revenue fell 5% year over year to $3.15 billion. Adjusted operating income was $223 million (excluding impairments), down 13% year-over-year.
Assuming normal seasonal trends, the company expects fourth-quarter to first-quarter consolidated operating income (factoring in one-time charges) to decline 20% to 25% sequentially. This is consistent with the previous 10 years of experience (excluding the two pandemic years).
Fourth-quarter results and guidance sent JB Hunt (NASDAQ: JBHT ) shares down 11.1% in after-hours trading Thursday.
Operating income, margin and earnings per share in the table below have been adjusted to exclude one-time charges in the fourth quarter of 2024 and $53.4 million of insurance-related items in each segment in the fourth quarter of 2023.
Intermodal revenue fell 2% year over year to $1.6 billion due to a 5% increase in load volume, but revenue per load fell 6% (down 3% excluding fuel surcharges). JB Hunt had record freight volumes in the quarter, with transcontinental volumes up 4% and Eastern loads up 6%, even as the model competed with lower truck rates.
According to data from the Association of American Railroads, total intermodal traffic on U.S. Class I railroads increased 9% year-over-year this quarter.
The segment's operating ratio was 92.7% (the inverse of operating profit margin), down 170 basis points year over year (excluding prior year insurance add-back, down 70 basis points). Costs associated with increasing capacity and relocating equipment, as well as adding 800 intermodal drivers during the peak season, are headwinds.
Management said on a conference call Thursday that partner BNSF's (NYSE: BRK.B) rail service did decline in the early weeks of the quarter, which put pressure on margins. However, management said recent service issues in Occidental were related to record volumes rather than structural issues.
Revenue per load rose slightly for the second consecutive quarter, but pricing headwinds from recent bid negotiations will persist into the first half of 2025. The company said customer bid compliance had improved and it hoped to see rate increases on future bids to offset cost inflation.
JB Hunt said customer satisfaction reached an all-time high during the quarter.
Dedicated revenue fell 5% year over year to $839 million as the average number of trucks used fell 4% and weekly revenue per truck fell 1%. The company added 440 new trucks into service during the quarter (up from more than 1,700 for the year), but the truck additions lagged the loss of customer accounts.
Fleet losses are likely to continue into the early second quarter, but the company expects to add 800 to 1,000 net-consumption trucks this year.
The segment's OR, excluding non-recurring charges in the prior year, was 89.2%, down 120 basis points year over year. The company's mature business (excluding start-up costs for new customers) has an OR of between 86% and 88%, in line with long-term targets.
Brokerage revenue fell 15% year over year to $308 million due to a 22% drop in load volume, partially offset by a 9% revenue per load increase. (Load volume increased 7% sequentially, and revenue per load increased 3%.) The division cut costs and reduced headcount by more than 30% year over year. However, the company recorded an operating loss of $21.8 million (excluding impairment charges of $5.8 million related in part to the acquisition of BNSF Logistics' brokerage business).
Approximately $35 million in integration and impairment costs resulting from the acquisition will not be incurred this year. The company is still looking to cut operating costs.
JB Hunt incurs $100 million in total operating costs (depreciation charges and equipment storage fees) related to excess capacity in its intermodal and truckload units. That number now stands at $60 million.
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