J B Hunt & Prologis see prospect of lower growth whilst demand remains strong

The intermodal and road freight provider J B Hunt looks to be doing reasonably well. The latest Q3 numbers from the company show that revenue was up 22% year-on-year and operating income increased 32%. Yet the company is not that optimistic about prospects in the short-term.

Both the intermodal business and the dedicated contract carriage operation drove the business forward with revenue per load increasing 17-18%. Certainly, costs are still rising, with more expensive rail charges, fuel, truck leasing and driver salary costs, but these are still outweighed by the strength of demand. Or rather they have been so far this year.

Problems in the US rail system continue but the situation seems to be getting better and it’s easier to recruit drivers. However, management commented in the latest results report that, “further evidence has presented itself over the course quarter that requires an increased level of caution on broader demand trends and economic activity.” Management continued, saying that “peak season this year just does not appear to be much of an event”. The company continues to see growth in demand, but that growth is not conforming to the normal pattern.

There are other indicators in the US that the logistics markets are slowing. For example, logistics property company Prologis has observed that the market for warehousing is cooling, with the company’s CEO seeing “record results” but that “given the impact of aggressive Fed tightening and the rapid change in market sentiment, we will run our company assuming an economic slowdown.”

To summarise the condition of the US market at least, demand is not falling but the normal jump in growth in the lead-up to Christmas is not there. However, this is being ameliorated by costs rising less quickly and less congestion.

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Source: Transport Intelligence, 20th October 2022

Author: Thomas Cullen