Hub Group reported net income in the fourth quarter of 2013 was $16.5 million, down 12 percent from $18.8 million in the same period in 2012, ending the year in a slump after three quarters of growth.
However, total quarterly revenue for the U.S. domestic freight transportation provider was $885 million, increasing 11 percent year-over-year. The Hub segment’s fourth quarter revenue rose 11 percent, reaching $684 million, including intermodal revenue, which improved 3 percent to $466 million on a 4 percent increase in volume; truck brokerage revenue, which inched up 1 percent to $88 million; and revenue from Unyson Logistics, which jumped 72 percent to $130 million. The Mode segment’s revenue rose 8 percent to $214 million.
Stifel Transportation & Logistics Research Group said the Hub segment’s quarterly revenue was “roughly in line” with the analyst’s expectations, as better-than-expected revenue at Unyson offset weaker intermodal revenue, which was below expectations. The 72 percent revenue gain for Unyson was driven by new large logistics customer additions that began in the second quarter, while the intermodal segment was affected by “challenging” pricing conditions from “aggressive” pricing behavior by Hub’s competitors, as well as the “relative” lack of a fourth quarter seasonal surge in volume, according to the analyst.
“We continue to see a difficult pricing environment in intermodal but are taking steps to improve margins,” said Mark A. Yeager, vice chairman, president and chief operating officer of Hub Group, during the company’s earnings call, as transcribed by Seeking Alpha. “We are currently changing processes for equipment allocation, prioritization and substitution, including the elimination of higher cost drayage and equipment alternatives where appropriate, refining cost projections for pricing and changing how we define and allocate transportation costs to existing business in order to better evaluate network contribution.”
Regarding the truck brokerage division, David P. Yeager, chairman and CEO of Hub Group, said during the earnings call that a truckload environment where supply and demand are in balance “continues to be a challenge.”
Although profit dropped in the fourth quarter, the Oak Brook, Ill.-based company’s full-year profit was up 2 percent year-over-year, totaling $69 million, compared with $68 million. Annual revenue improved 8 percent to $3.4 billion.
“We had a solid year and are focused on our strategic initiatives to deliver strong results in 2014,” said David P. Yeager, chairman and CEO of Hub Group, in a written statement.
Stifel has announced “slight downward” revisions to Hub Group’s earnings expectations for 2014 and 2015, fueled by expected challenges for the intermodal and brokerage divisions, but partially offset by anticipated growth in the logistics segment. However, with $8 million in debt and $69 million in cash, Hub Group is positioned for acquisitions in 2014, Stifel noted.
“Our first use of cash would be for an acquisition,” said Terri A. Pizzuto, CFO, principal accounting officer, executive vice president and treasurer of Hub Group, during the earnings call.