The Federal Reserve’s interest-rate hikes and other macroeconomic pressures have added a layer of uncertainty to the trucking sector in recent weeks, leaders of J.B. Hunt Transport Services and Ryder System told investors this week.
Speaking to the JPMorgan 2023 Industrials Conference, J.B. Hunt President Shelley Simpson said on March 14 that executives of the carrier, (No. 4 on the 2023 FleetOwner 500: For-Hire list), have spent the past three weeks checking in with about 100 key customers to get a feel for their outlook on 2023. Those companies, she said, “haven’t changed their tune much” and are still generally upbeat that the second half of the year will be better than today’s environment, in which a number of them are still working through some excess inventory.
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But Simpson, who added that many customers “also expect some kind of peak,” whereas 2022 didn’t produce the typical seasonality from summer on, said she’s not quite as sure as before that those forecasts will pan out.
“As we’ve progressed through the quarter, I’ve become slightly less optimistic than our customers,” Simpson said. “Not that I’m pessimistic but I’m trying to figure out how much our customers really know.”
Simpson made it clear that the J.B. Hunt team isn’t seeing the market deteriorate significantly enough to change its growth expectations for the year, which include a freight rebound starting in the spring. But her comments build on the measure of caution she and her colleagues voiced in January.
“There probably isn't a lot of expectations from the demand environment changing much—at least in terms of what visibility we have here in the first quarter … We don't have any crystal ball,” Brad Delco, J.B. Hunt's SVP of finance, told analysts at the start of the year. “I think giving you any more detail on guidance and how the year plays out would probably not be in our best interest.”
Ryder expects less demand in 2023
Also speaking to the JPMorgan conference this week was Robert Sanchez, board chair and CEO of Ryder System. He said the Miami-based company expects a softening in demand this year and said that dynamic is showing up today in lease signings for vehicles to be delivered in 2024.
“We’re finding that customers are saying, ‘Wait a minute, there’s a lot to happen between here and January,” Sanchez said. “There’s a little more uncertainty in the system than maybe six months ago as people begin to see what’s happening with interest rates and with the economy.”
See also: Fleets seek flexibility amid ongoing economic challenges
Sanchez noted customers’ delays shouldn’t leave Ryder (No. 22 on the FleetOwner 500) with a big headache. He said the truck rental market is slowing and that his team will be able to divert some of its units allocated to that group to leases should customers currently hesitant still sign deals in the coming months.
The executives’ comments about lasting—and maybe growing—uncertainty in the freight market came shortly after DAT Freight & Analytics reported that load-to-truck ratios on its platform, an indicator of spot market demand, fell to their lowest levels since May 2020.
Investors, already jittery about stresses on the U.S. banking system, didn’t react kindly to Simpson’s comments: Shares of J.B. Hunt (Ticker: JBHT) fell 3% to about $168 on March 14. They are down about 5% over the past six months but have lost 15% of their value since early February, trimming the company’s market capitalization to about $17.4 billion.
Ryder shares (Ticker: R) rose slightly on March 14 to $86.66. Since mid-September, they have climbed 15%, growing the company’s market value to nearly $4 billion.
