Volume, revenue rise for J.B. Hunt, but so do costs

Volume, revenue rise for J.B. Hunt, but so do costs

A number of factors led to higher costs for J.B. Hunt Transport Services in the second quarter.

A warmer freight market boosted revenue at J.B. Hunt Transport Services in the second quarter, but costs also increased, including the price of purchased transportation and driver wages. Total operating revenue at the fourth-largest US trucking operator for the quarter rose 7 percent to $1.73 billion, but operating profit dropped 7 percent to $164 million as operating costs rose.

J.B. Hunt’s expanded revenue and volumes and narrower profits reflect challenges trucking and third-party logistics (3PL) operators will face as the US economy begins moving at a faster pace. Unemployment remains low, driving up wages, and fuel and equipment costs are rising. Purchased transportation costs rose 9.6 percent in the quarter, and wages rose 4.8 percent.

That makes second-half rate hikes even more likely for shippers. 3PL operators say contract truckload rates, as well as less-than-truckload rates, are on the rise as overall capacity tightens. “We’ve experienced a general tightening of capacity over a broad base,” Bob Biesterfeld, president of North American transportation at C.H. Robinson Worldwide.

For J.B. Hunt, increases in rail and over-the-road transportation costs, startup costs associated with new contracts, higher driver wages and recruiting costs, increased insurance and claims costs, increased equipment and facility maintenance costs, and increased technology costs were all contributing factors to softer profit margins at the $6.6 billion intermodal trucking company.

Most of J.B. Hunt’s operations, except for its pure truckload division, experienced load volumes jump in the quarter, typically one of the busiest for US domestic transportation companies. Intermodal load volumes rose 5 percent on average, with transcontinental loads climbing 10 percent from a year ago. Intermodal revenue jumped 7 percent to $1 billion in the quarter, J.B. Hunt said Monday.

Revenue at the company’s dedicated contract services (DCS) division increased 8 percent to $412 million, and DCS operating profit fell 4 percent to $49 million. J.B. Hunt added 226 trucks to its dedicated division from the first quarter, a 486-truck increase from a year ago, as the company continued to sign up shippers, especially those planning to turn over private fleets.

Overall, J.B. Hunt operated 15,141 tractors in the second quarter, company-owned and owner-operated. That is a 2.9 percent year-over-year increase. Only its truckload division decreased capacity, cutting its tractor count by 114 units, or 5.2 percent, from a year ago.

Orders and revenue fairly hummed at J.B. Hunt’s non-asset brokerage unit, Integrated Capacity Solutions, with load volume up 20 percent and revenue per load and total revenue both up 9 percent. Carrier rates, however, increased, too, faster than J.B. Hunt could raise its own rates. The brokerage business had a $200,000 loss in the quarter on $222 million in revenue.

J.B. Hunt Truck, the Lowell, Arkansas company’s over-the-road division, shrank in the quarter, with total revenue dropping 4 percent to $95 million and operating profit dropping 37 percent to $5.6 million. Contract rates also dropped 0.4 percent.

Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @wbcassidy_joc.