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Analyzing J.B. Hunt’s Dedicated Contract Services Segment

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Oct. 17 2018, Updated 2:00 p.m. ET

DCS segment

The DCS (Dedicated Contract Services) segment is J.B. Hunt Transport’s (JBHT) second-largest segment in terms of revenues. In the third quarter, the segment’s revenue share was 24.7%—up 0.9% from 23.8% in the third quarter of 2017. The segment’s third-quarter revenues rose 24% YoY to $543.0 million from $438.0 million in the third quarter of 2017.

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Revenue growth

In J.B. Hunt Transport’s DCS segment, the productivity (measured in revenue per truck per week) rose ~7% YoY in the third quarter. Excluding the fuel surcharge, the productivity increased ~4% YoY during the quarter. The higher productivity was mainly due to customer rate increases and better asset integration between customer accounts and higher customer supply chain fluidity.

FMS (Final Mile Services), which is included in the DCS segment’s revenue growth, reported a $23.0 million revenue increase in the third quarter compared to the same period last year. The fleet had a net addition of 1,261 revenue producing trucks by the end of the third quarter. Among the additions, ~42% were private fleet conversions and 5% were FMS compared to traditional dedicated capacity services.

J.B. Hunt is the largest dedicated service provider in North America. With the help of dedicated trucking companies, shippers can outsource their logistics functions and focus on their core business, which is known as “private fleet conversion.” J.B. Hunt expects a better fourth quarter for the DCS segment’s revenues compared to the third quarter due to pricing gains.

ETF investment

Overall, 70 ETFs include J.B. Hunt stock in their portfolios. The iShares Transportation Average (IYT) has the highest exposure of 6.27% in J.B. Hunt stock. IYT’s top holdings include FedEx (FDX) at 12.39%, Norfolk Southern (NSC) at 9.57%, and Union Pacific (UNP) at 8.50%.

Next, we’ll discuss the Integrated Capacity Solutions segment’s performance in the third quarter.

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