After closing book on 2024, J.B. Hunt sees signs of market upswing but higher operating costs
Lower yields, as well as higher labor and maintenance costs in J.B. Hunt Transport Services Inc.’s intermodal business, more than outweighed solid volume growth on both coasts and helped prompt President and CEO Shelley Simpson to tell analysts and investors her team will look to cut more costs.
Executives of Arkansas-based J.B. Hunt, the No. 4 company on the FleetOwner 500: For Hire list, said they continue to see the freight market behaving in more traditionally seasonal ways. In addition, EVP Spencer Frazier noted that, while there’s still some excess capacity, some of J.B. Hunt’s customers have been signing up for services earlier than in recent years, suggesting the market may be turning in earnest.
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In the fourth quarter, J.B. Hunt produced net profits of $155 million—up slightly from late 2023—on total operating revenues of nearly $3.15 billion, which were down about 5% year over year. Operating income was $207 million versus $203 million, partly due to lower rents and purchased transportation. However, various inflationary pressures persist: Besides labor costs, CFO John Kuhlow said that, despite two record years for safety performance, J.B. Hunt’s insurance premiums have doubled.
The company’s dedicated and truckload groups were bright spots in Q4, growing their combined operating profits by 15% to nearly $99 million. However, operating income from intermodal work—which accounts for more than half of sales and profits—fell 10% to $117 million, and revenue fell 2% to $1.6 billion despite volume growth of 5%. The culprits: a 6% drop in revenue per load as well as higher hiring and training costs and greater spending on maintaining and repositioning equipment.
On a conference call January 16, Intermodal President Darren Field said rates negotiated last year continue to hamper profitability and added that his team is having lots of conversations with customers about prices for the coming year. Demand in some markets, he said, will justify price hikes, while other negotiations this bidding season will be more about taking out costs.
“It is a conversation one customer at a time,” Field said. “I’m very confident that the service product we’ve offered over the last two years has really earned us the right to have really strong confidence in what we’re providing […] for our customers. We are going to share that with the customers and work on our price.”
On the cost side, more broadly, executives pointed out that they’ve pushed ahead with a plan outlined last spring to cut $100 million in spending and that J.B. Hunt’s headcount is now 12% lower than at its peak. (The company finished 2023 with roughly 34,700 employees, one-eighth of which is roughly 4,200 people.) They also said they are looking to trim other expenses and have set a capital budget of $700 million to $900 million for this year, the bottom end of which is only slightly higher than 2024’s $674 million.
Investors were not fans of the earnings report or executives’ commentary, however: Shares of J.B. Hunt (Ticker: JBHT) slid more than 10% to about $167 in after-hours trading January 16. If that’s where they end the week, it will leave them essentially unchanged from late July.
Despite the ongoing industry challenges and the work J.B. Hunt has left to do, Simpson ended the conference call with a statement of intent.
“It was our prove-it year … and we proved it,” she said of 2024, pointing to J.B. Hunt’s record customer satisfaction scores. “This is our year to grow.”
