Dow Jones Transportation Average component JB Hunt Transport Services (JBHT 89.20, +0.06) holds a slim pre-market gain after reporting better than expected earnings.
The trucking and transportation company reported above-consensus first quarter earnings of $0.92 per share on revenue of $1.63 billion, which was just a shade below estimates.
Excluding fuel surcharges, current quarter total operating revenue grew 2.0% year-over-year.
Operating income declined 11.3% year-over-year to $149 million. Volume growth and new customer contracts were more than offset by lower customer rates from competitive pricing, increased purchased transportation costs, higher driver wages, continuing branch expansion, increased equipment ownership costs, and increased insurance and claims costs.
Looking at the segment breakdown, Intermodal revenue grew 5.0% year-over-year to $937 million while operating income fell 8.0% to $95 million. Volumes grew 2.0% with transcontinental loads growing 7.0%. Eastern network load volume declined 6.0% year-over-year and competitive truckload pricing persisted from 2016. Segment revenue per load increased 3.0% while revenue per load excluding fuel surcharge declined 1.0%. That decline, combined with increases in rail purchased transportation costs, reduced Eastern network utilization, and increased wages and insurance costs offset benefits from volume growth, resulting in lower operating income.
Dedicated Contract Services revenue increased 10.0% year-over-year to $392 million while operating income was unchanged at $45 million. Productivity increased 6.0% while productivity excluding fuel surcharges was up 1.0%, thanks to improved integration of assets between customer accounts and customer rate increases. The company grew its revenue producing fleet with 181 net additions compared to one year ago. Customer retention rates remained above 98%. Operating income held steady as increased revenue and improved asset integration were offset by higher driver wages, increased insurance and claims costs, higher health insurance costs, and higher start up expenditures for new customer contracts.
Integrated Capacity Solutions revenue grew 14.0% year-over-year to $209 million while operating income fell 59.0% to $4.50 million. Volumes jumped 36.0%, but revenue per load declined 16.0% due to freight mix changes driven by customer demand. Spot volumes grew 22.0% and contractual business load counts increased 42.0%. Contractual business accounts for 76.0% of total load volume and 63.0% of total revenue. One year ago, contractual business made up 73.0% of total load volume and 64.0% of total revenue. Operating income fell due to lower gross profit margin (to 14.3% from 17.3%), increased claims costs, and increased number of start-up branches (newer than two years old).
Truck revenue declined 2.0% year-over-year to $94 million while operating income fell 46.0% year-over-year to $4.90 million. Excluding fuel surcharge, revenue declined 6.0% due to a 7.0% decline in revenue per load, which was partially offset by a 1.0% increase in load count. Customer contract rates declined 1.5%. The decline in operating income was due to benefits from increased load count and fewer empty miles, offsetting lower customer rates per mile, increased maintenance costs, and higher insurance and claims costs.
Shares of JB Hunt hit a record high in early December ($102.38), but the recent stretch has not been as kind to the stock, which is down 12.9% from its all-time best.