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Volume Decline Slows Down J.B. Hunt’s Revenue Growth in Q1

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Revenues missed expectations

J.B. Hunt Transport Services (JBHT) reported first-quarter revenues of $2.09 billion, a YoY increase of 7.3%. Nonetheless, the company’s top-line growth was significantly lower than its previous quarter’s growth rate. Notably, J.B. Hunt had registered strong double-digit revenue growth in all the four quarters of 2018. Moreover, the trucking company’s top-line results missed analysts’ expectations of $2.21 billion.

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The YoY dismal revenue growth was mainly due to a 7% decline in its Intermodal segment (or JBI) volumes. The company noted that the division’s volumes were negatively affected by rail lane closures and severe winter weather, which impacted its Chicago operations.

Segment-wise performance

J.B. Hunt’s JBI business segment contributed ~52% to its first-quarter total revenues. The segment reported a 2% YoY increase in revenues, reaching $1.09 billion. A 10% YoY surge in revenue per load more than offset the negative impact of a 7% decline in volumes. However, JBI’s operating income plunged 10% YoY. Benefits from increased customer rates were more than offset by an increase in rail purchased transport costs, reduced network utilization, higher wages, a rise in equipment ownership and maintenance costs, and lower efficiency due to winter weather.

The company’s DCS (Dedicated Contract Services) segment’s revenues surged 22% YoY to $602 million (29% of total revenues), mainly driven by a 6% increase in revenue per truck per week (also known as productivity) and net addition of 1,644 revenue production trucks. Operating income grew 24% YoY due to increased productivity and new truck additions.

Revenues for its ICS (Integrated Capacity Solutions) segment increased 2% YoY to $301 million (14% of total revenues) primarily driven by a 15% rise in volumes, partially offset by a 12% decline in revenue per load. However, operating income decreased 22% YoY due to higher personnel costs, increased employee count, and increased technology spending.

The Truck segment (or JBT) revenue grew 10% YoY to $102 million (5% of total revenues), mainly driven by customer rate increases and 4% higher load counts. Operating income jumped 41% due to increased revenue per load and reduced equipment ownership costs.

Peers’ expectations

Most transportation (IYT) companies plan to report their first-quarter results in the next few weeks. Analysts anticipate XPO Logistics (XPO) and C.H. Robinson Worldwide (CHRW) to post YoY first-quarter revenue growth of 1.6% and 1.7%, respectively. Peer Hub Group (HUBG) is projected to report a 13.5% YoY decline in first-quarter revenues.

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