JBHT outpaces expectations as intermodal volume and yield trends improve
J.B. Hunt Transport Services (JBHT) reported third-quarter earnings that beat analyst expectations, delivering an EPS of $1.49, which was $0.08 ahead of the consensus estimate of $1.41, although down from $1.80 a year ago. Revenue came in at $3.07 billion, slightly above the $3.02 billion expected by analysts, representing a 3% decline year-over-year. Despite the decline, the better-than-expected intermodal volume and yield trends have improved the company's outlook for the remainder of 2024.
Key metrics revealed that intermodal loads grew by 5.1% year-over-year to 547,988, beating estimates of 524,077, while intermodal revenue per load decreased by 4.8% to $2,841, close to the estimated $2,806. The Dedicated Contract Services segment saw a 6.1% decline in loads, and revenue fell 5.2% to $846 million, slightly missing expectations. Similarly, Integrated Capacity Solutions (ICS) revenue fell by 6.7% to $278.2 million, and Truckload revenue dropped 12% year-over-year to $173.2 million, both slightly underperforming expectations.
One of the bright spots was the improvement in operating losses within the ICS segment, where losses narrowed to $3.3 million, a $10 million improvement from the previous quarter. However, the company faced ongoing challenges, such as declining volumes in some business segments and continued yield pressure. These challenges, combined with equipment repositioning costs and driver hiring expenses, kept operating margins under pressure, with the operating ratio deteriorating by 100 basis points year-over-year to 92.8%.
CEO commentary acknowledged these headwinds but highlighted that intermodal demand improved as the quarter progressed, helped by seasonal patterns and growth on eastbound transcontinental lanes. JBHT also noted that while some of the demand may have been driven by peak season pull-forward, the overall outlook for intermodal remains positive due to its long-term economic and environmental advantages over other modes of transport.
Economic trends, such as a softening truckload market and heightened competition, have contributed to the pressure on JBHT’s volumes and pricing. Despite these challenges, the company is confident in its strategy, which includes leveraging its partnership with BNSF Railway and maintaining a strong focus on cost control. JBHT also noted that the trucking industry remains oversupplied, which has further impacted pricing in both truckload and intermodal segments.
From a valuation standpoint, JBHT shares gained over 8% in after-hours trading following the earnings beat, reflecting investor optimism about the company’s improving trends. However, with the stock trading at elevated levels, some analysts remain cautious, noting that the market’s view of JBHT's normalized earnings may still be too high, particularly given ongoing margin pressures and competitive dynamics.
Looking ahead, analysts expect that JBHT will need to manage these pressures carefully, especially as the company enters the crucial fourth-quarter peak season. The outlook remains mixed, with both positive signs of demand recovery and ongoing challenges from excess capacity and price competition.
Overall, JBHT's Q3 results were a relief for investors, marking the company's first earnings beat in several quarters. While challenges remain, particularly in the truckload and intermodal markets, the company’s strategic focus on improving margins and managing capacity positions it well to capitalize on long-term growth opportunities.