Activity seem to be slowing in the American trucking and intermodal market. Leading road freight and intermodal provider J.B. Hunt yesterday reported third quarter numbers that saw a downturn in both demand and profitability.
For its key intermodal business, J.B. Hunt saw volumes “flat with the same period in 2018” with “trans-continental loads up 7% but demand in the eastern states down 11%”. Revenue per load increased by 2% pushing up overall revenues by 2%. Operating profit grew by 10% year-on-year but this more due to exceptional items, with the underlying numbers seeing income down by around 10% year-on-year due in part to higher rail purchasing costs.
In its ‘Dedicated Contract Services’ segment, results were better, with revenue up 28% year-on-year and operating income more than doubling. The latter was much more due to exceptional items yet underlying operating profit still increased by 80%. Much of these increased profits came from higher productivity although driver’s wages continued to climb. It is worth noting that this sector includes the ‘Final Mile Services’ business which is seeing considerable demand.
The Truck (JBT) business saw a significant fall in revenue of 11% year-on-year whilst operating income fell 28% driven by both lower overall demand and less cost-efficient loads. The Integrated Capacity Solutions business also saw revenues lower by 3% year-on-year and an operating loss of $5.6m.
Overall the top line numbers were not to bad for J.B. Hunt, with revenue up 7% at $2.4bn and operating income up 21% at $212m but the underlying picture reflects a weakening market including in terms of domestic demand.
Fellow truck operator Knight-Swift has also indicated that its results will be weaker this quarter commenting in an earnings update that forecast “lower than expected income” is due to “increased competition within the intermodal market, leading to unexpected reductions in volume and revenue per load, and greater than expected pressure on freight rates, primarily due to an oversupply of truckload capacity” which in turn is driven by “ a seasonal improvement in demand during the fourth quarter of 2019… less robust than originally projected.”
Whilst the road and intermodal sector in the US is still strong as a result of the several years of growth seen in the wider US economy, it appears the sector may be heading, if not into a recession, then into a less buoyant market.
Source: Transport Intelligence, October 17, 2019
Author: Thomas Cullen