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Why Did J.B. Hunt Transport’s 3Q16 Intemodal Revenue Rise?

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3Q16 Intermodal revenue

As discussed earlier, the Intermodal segment remains J.B. Hunt Transport Services’ (JBHT) largest segment. In 3Q16, this segment contributed 57% of the company’s total operating revenue of $1.69 billion. 

The Intermodal segment reported revenue of $970.0 million in 3Q16, a rise of 2.2% over the $949.0 million it had reported in 3Q15.

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Why revenue rose

The segment’s overall volumes rose 7% in 3Q16 on a year-over-year basis. A maximum load growth of 8% was recorded on the transcontinental network in the quarter, whereas loads grew 5% in the eastern network. West Coast outbound freight growth surpassed the remaining network. Overall Intermodal revenue growth was also fueled by better western rail services.

Although the Intermodal segment’s revenue rose 2.2%, its segmental operating income fell 7% in 3Q16. Better volumes, improvements in network balancing, and less thrust on third-party dray carriers were offset by reduced pricing, higher rail purchase transportation services, increased driver costs, and higher insurance and claims expenses.

Management’s insight

For 2016, JBHT’s management expects 8%–10% overall load growth compared to the previous year. However, with fuel prices range bound, management anticipates a fall of 1%–3% in revenue per load. On the margins front, JBHT expects its Intermodal segment’s margin to erode 0.5%–1% in 2016.

Peer group intermodal segment    

In 2Q16, JBHT recorded a 3% rise in its Intermodal segment’s revenue. JBHT’s close competitor, Swift Transportation (SWFT), saw its 2Q16 intermodal revenue fall 8.5% in contrast. For Knight Transportation (KNX), intermodal revenue and brokerage revenue form part of its Logistics segment. KNX’s Logistics revenue fell 14.8% in 2Q16. Intermodal revenue was included in the Werner Logistics segment for Werner Enterprises (WERN). This segment’s revenue rose marginally in 2Q16.

Investors keen on transportation sector exposure can consider the iShares Transportation Average ETF (IYT). Trucking and railroad companies form ~35% of the portfolio holdings of IYT.

In the next article, we’ll discuss JBHT’s dedicated contract services segment’s 3Q16 financials.

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