J.B. Hunt Transport Services shares spiked early Wednesday as the transportation and logistics company reported better-than-expected third-quarter results despite a challenging freight market. Net earnings dropped to $1.49 per share for the September quarter from $1.80 the year before, as the company revealed late Tuesday.
The consensus on Capital IQ was for EPS of $1.41. Revenue decreased 3% year over year to $3.07 billion, but it topped Wall Street's view for $3.01 billion, leading to a remarkable 7.1% rise in the stock during premarket trading. The group attributed the decrease in revenue mainly to declines in gross revenue per load within its intermodal and truckload segments.
Additionally, the overall result was impacted by a fall in load volume in the integrated capacity solutions and dedicated contract services units. Chief Financial Officer John Kuhlow noted during an earnings call, “We saw our volumes on a sequential basis outperform normal seasonality, particularly in intermodal, but also in our highway services business, which encompasses both integrated capacity solutions and truckload.
That said, overall yield pressure in these areas continues to put pressure on margins and our overall profitability.” Revenue in the intermodal business remained flat at $1.56 billion. A 5% gain in volume was offset by an equivalent 5% decrease in gross revenue per load, attributed to changes in customer rates, fuel surcharge revenue, and the freight mix.
Sales from dedicated contract services saw a decline of 5% to almost $846 million, influenced by a 3% drop in both average trucks and productivity. In the integrated capacity solutions unit, revenue suffered a 7% fall to $278.2 million as volume decreased 10% year over year. Similarly, truckload sales fell by 12% to $173.2 million, while sales in the final mile services segment experienced a 3% decrease due to weakening demand across various end markets. Operating income fell 7% to $224.1 million, driven by lower revenue across most segments along with increased personnel-related, insurance, claims, and equipment expenses.
Operating expenses decreased to $2.84 billion from $2.92 billion in the same quarter of the previous year, the company reported. Kuhlow emphasized, “We have made significant improvements across the business to rightsize our cost structure, primarily evidenced in our highway services businesses, where both truckload and integrated capacity solutions have improved their operating margins in comparison to the prior year period.” Furthermore, J.B.
Hunt anticipates net capital expenditures will be around $625 million for 2024, lower than the prior guidance of $650 million to $700 million, according to Kuhlow. “Our update from the prior quarter largely reflects the sale of all the chassis that we purchased from Walmart, which are not compatible with the containers we've acquired following retrofitting of those assets,” the CFO elaborated. Despite facing a challenging freight environment, Chief Executive Shelley Simpson remarked on the call that J.B.
Hunt is focused on controlling costs wisely..