J.B. Hunt Transport (JBHT +4%) has seen a notable uptick today after reporting earnings and revenue growth in Q3, driven by a return to positive intermodal volumes. The intermodal trucking company had experienced a stagnant trend since April due to consecutive disappointing earnings and weak intermodal volumes. Economic conditions deteriorated just before 2023, with a lack of peak season activity in late 2022 signaling trouble. Demand conditions worsened, creating significant challenges for JBHT over several quarters, with intermodal volumes struggling in Q1 and Q2, earnings missing estimates, and revenue falling short of expectations.
Investors are optimistic about JBHT's robust Q3 performance, which could mark a long-awaited turnaround.
- Economic conditions remain tough, as evidenced by JBHT's 17% year-over-year drop in EPS to $1.49 and a 3% decline in revenue to $3.07 billion. Inflationary costs continue to pressure margins across all segments.
- Pricing is crucial for improving margins, yet competition for limited demand is causing pricing pressures. JBHT expects current pricing to persist through the first half of 2025 but believes long-term pricing is unsustainable. The company has seen some freight shifting from truck to rail, boosting its Intermodal segment.
- Intermodal volumes returned to positive in Q3, growing 5% year-over-year. This includes a 7% increase in transcontinental volumes, double-digit growth in Southern California outbound volumes, and a 3% rise in East volumes. JBHT maintains its long-term view that more freight will shift from over-the-road to intermodal.
- Other segments showed mixed results. Dedicated Contract Services faced fleet size issues due to customer downsizing and bankruptcies, though the market is seen as stable. In Final Mile, demand for bulky items like furniture and appliances remained low, affecting results. In Integrated Capacity Solutions, competitive pressures impacted volumes, but JBHT is making progress in stabilizing trends.
JBHT is gaining momentum after its Q3 success, despite ongoing economic uncertainties that could lead to volatility. The positive Q3 developments set an optimistic tone ahead of peers' reports, including MRTN, KNX, ODFL, and XPO.
