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J.B. Hunt Transport Services said it would stay the course, increasing intermodal capacity ahead of demand to avoid the service failures the industry experienced during the pandemic. That means carrying a higher cost burden and potentially posting earnings misses like it did in the 2024 first quarter.
The multimodal provider reported first-quarter earnings per share of $1.22 Tuesday after the market closed, 28 cents light of the consensus estimate and 67 cents lower year over year (y/y). A higher tax rate presented a 7-cent headwind while higher interest expense was a 1-cent headwind.
Intermodal revenue declined 9% y/y to $1.4 billion as revenue per load fell by a similar amount, with load counts flat with the prior year. Transcontinental loads were 5% higher y/y, largely due to a weaker comparison to the same period last year, while depressed truckload rates weighed on intermodal demand in the East, pushing volumes 7% lower.
Total intermodal traffic on the U.S. Class I railroads was 9% higher y/y in the quarter, according to the Association of American Railroads. J.B. Hunt’s (NASDAQ: JBHT) intermodal loads were down 2% y/y in January, up 3% in February and off 1% in March. The company noted price competition from both TL carriers and other intermodal providers. It pointed to a “disciplined approach” to pricing as an explanation for the loss in share.
Management reiterated a “long-term view” that the intermodal space will take share over time and said it’s comfortable growing its fleet ahead of demand. J.B. Hunt currently has 20% excess container capacity and is roughly 30,000 units shy of a goal to grow its fleet to 150,000 units.
“When we’re there to support our customer to grow the demand, it certainly bears fruit for our shareholders over the long term as those customers just gain more and more confidence in our ability to serve their needs, said Darren Field, president of intermodal services, on a Tuesday evening call with analysts.
The unit has repriced roughly 40% of its contracts for the current bid season, meaning pressure on rates will likely linger without a material change in market dynamics. Volumes were down 9% from the fourth quarter, which was worse than the normal seasonal trend. However, loads in the fourth quarter were ahead of normal seasonality. Yields fell 5% from the fourth quarter to the first.
“The problem is the negative dynamics that impacted 1Q results won’t change that quickly given JBHT’s longer pricing cycle and limited intermodal spot market opportunities,” Deutsche Bank (NYSE: DB) analyst Amit Mehrotra said in a Tuesday note to clients.