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J.B. Hunt: Truckload Segment’s Third-Quarter Revenues

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Truck segment’s third-quarter revenues

The Truckload segment is J.B. Hunt Transport Services’ (JBHT) smallest segment in terms of its revenues. The Truck segment’s revenues expanded 14% in the third quarter to $106.0 million from $93.0 million in the third quarter of 2017. The segment’s share in J.B. Hunt’s third-quarter revenues declined 0.2% to 4.8% from 5.0% in the same period in 2017.

The above graph reveals that the company’s Truck segment’s revenue growth in the third quarter was highest in the last eight quarters. The segment’s revenues displayed upward momentum YoY (year-over-year) in the third quarter. The Truckload segment’s YoY revenue growth in the last two quarters reflects a favorable environment in the US truckload market.

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Truck segment’s revenue growth

J.B. Hunt’s revenues, excluding fuel surcharges, grew ~13% YoY in the third quarter. The growth was mainly due to a 19% YoY rise in the rates per loaded mile. However, the revenue growth was offset by a 5% decline in the length of the haul compared to the third quarter of 2017. During the third quarter, comparable contractual customer rates expanded ~13% compared to the third quarter of 2017. At the end of third quarter, J.B. Hunt operated 1,972 tractors compared to 2,040 in the same period last year.

Cass Truckload index

The spot truckload rates rose steadily in the first half of 2018. In the third quarter, the spot truckload growth rate was soft. In August, the Cass Truckload Linehaul Index displayed a strong acceleration rate that started in 2017. In August, the index was 138.4—up 11.1% YoY. The increase was the strongest percentage rise in the history of the Cass Truckload Linehaul Index.

Donald Broughton, an analyst and commentator for the Cass indexes, said, “Three months ago, we increased our realized contract pricing forecast for 2018 from a range of 6% to 8% to a range of 6% to 12%, and current data is clearly signaling that the risk to our estimate may still be to the upside. We believe that this is the strongest normalized percentage level of truckload pricing achieved since deregulation (normalized meaning except for extreme periods of recovery from recession).”

ETF investment

The First Trust Industrials/Producer Durables AlphaDEX Fund (FXR) has an ~8% weight in major US railroad companies and 6.59% weight in key trucking companies. Major transportation stocks included in FXR’s top holdings are Norfolk Southern (NSC) at 1.83%, Genesee & Wyoming (GWR) at 1.79%, and Ryder System (R) at 1.77%.

Next, we’ll discuss J.B. Hunt’s operating margins in the third quarter.

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