US trucking and intermodal giant JB Hunt saw third quarter operating profit down 33% and revenue, 15% compared to the same period in 2022. Even so, its leadership feel that the US freight recession is showing signs of coming to end.
Operating income fell to US $241.7m and revenue was down to $2.69bn in the quarter. This was led in a large part due to the ongoing freight recession in the US where intermodal volumes have fallen 9% in the first three quarters compared to the same period in 2022.
JB Hunt President Shelley Simpson is optimistic that there is light at the end of the tunnel as the freight recession goes. Simpson said, “We are not at a point yet to say we’re not out of the freight recession but we do feel we’re coming out of it,” adding, “We are seeing signs of things moving in a positive direction.”
Among the lowlights of the drop in revenue and profit was that its Integrated Capacity Solutions (ICS) segment that went from a $13.4m profit in Q3, 2022 to a loss of -$9.4m in Q3 2023. According to the company, it was hit by a double whammy of a collapse in loads and a sharp fall in revenues per load. It saw a 37.3% drop in loads to 163,745 compared to the same period in 2022, while revenue per load fell 16.9% in the same comparison.
ICS is in the process of absorbing the acquisition of 3PL, BNSF Logistics that JB Hunt bought in September. Speaking of the acquisition in September, CEO John Roberts said, “We recognized a unique opportunity to combine [BNSF and JB Hunt’s] efforts to serve the transportation market with 3PL services.” US rail freight giant BNSF and JB Hunt have had a close relationship for over 30 years, with JB Hunt’s Intermodal segment taking the lion’s share of its revenues and profits.
Other factors were at play in the drop in profitability, including higher labour costs and insurance costs. These were offset by the lower costs of bought in transportation including rail freight which forms a core part of JB Hunt’s business. Even so, for the Intermodal segment, the company saw a 14% drop in revenue per load compared to Q3, 2022 and this hit its overall bottom line.
Looking at the US market, there are signs of green shoots in the logistics industry with road and rail freight volumes not falling as steeply as those of the sharp falls more recently. While inflation is at play and impacting demand at the consumer end, there may well be better news coming in 2024 as consumer demand recovers. For JB Hunt, that may well be the light at the end of the tunnel it needs to return to strong profitability.
Author: Richard Shrubb
Source: Ti Insights
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