Looking at the fourth quarter and full year results from J.B. Hunt, the US market appears to still be growing but not particularly rapidly.
The leading intermodal and road freight operator saw revenue for the whole year up 6% at $9.17bn whilst operating income was 8% higher at $733.8m. The fourth quarter saw a similar performance in terms of revenue but profits were confused by exceptional items related to a dispute with BNSF. Top line numbers saw revenue up 6% in the quarter and operating income was up 67% at $205.1m although underlying profits fell by 20%.
Judging by the fourth quarter’s results, the problems largely lie in a muted intermodal sector, where volumes edged down on a complex picture. Demand in the Eastern States fell but trans-continental volumes were strong. Costs remain a problem with higher rail freight rates and continuing rises in the driver’s wages. Part of this division’s problem is unbalanced flows of traffic hitting utilisation. Revenue rose less than 1% to $1.27bn whilst operating income jumped 304% to $131.1m, the latter reflecting the exceptional payment from BNSF.
In the contract logistics services business demand was much better. Dedicated Contract Services saw revenue climb by 20% in the fourth quarter to $717m whilst operating income jumped by 34% to $79.6m. Although productivity improved generally, the last mile services saw considerable growth.
However, the ‘Integrated Capacity Solutions’ brokerage business saw a crunch in its business as prices for transport assets rose, squeezing gross profit, whilst the division invested heavily in people and technology. Revenue was up 9% at $377m but the business fell into a loss of $11.8m.
The trucking business also suffered, with revenue down 20% at $94m and operating income down 57% at $6.3m in the fourth quarter. J.B. Hunt attributed this to weak demand in the spot and contract markets, although this appears to contradict the market dynamics in the other businesses.
Whilst demand does not seem to be spectacular across the US perhaps, it is unwise to jump to too strong a conclusion about the market on these results as J. B. Hunt does appear to also be suffering from some internal problems.
Source: Transport Intelligence, January 21, 2020
Author: Thomas Cullen