J.B. Hunt’s First-Quarter Earnings Fall 16%

This story appears in the April 20 print edition of Transport Topics.

J.B. Hunt Transport Services Inc.’s first-quarter earnings fell 16% to $30.8 million, providing new evidence of the recession’s effect on carrier profits.

Revenue dropped 18% to $722.8 million.

The decline at Hunt, which was the first truckload company to report results for the January-March quarter, was softened by a 5% rise in intermodal volume and magnified by a $5.8 million operating loss in its truck unit.

“The lingering freight recession, now estimated to be in the third year, is the longest and deepest in modern transportation history,” said Kirk Thompson, chief executive officer of J.B. Hunt, in an April 13 statement.

Truckload carriers Landstar System Inc. and Werner Enterprises Inc. also reported lower profits last week, as did rail carrier CSX Corp.

While Hunt’s overall profits and revenue were down, Thompson said the company saw some bright spots.

“Despite a weak economy and lower demand, both intermodal and dedicated contract services have shown great resilience in profitability in the face of serious negative macroeconomic conditions,” Thompson said.

Hunt accounted for 9% of all rail intermodal volume during the first quarter, up from 7%, as the company’s volume increased and U.S. intermodal traffic fell 15%.

Despite the volume growth, Hunt’s intermodal revenue fell 10% and operating income dropped 20% as revenue per load was 15% lower at $1,955.

Performance was worse at the trucking unit, where a 45% drop in revenue contributed to the$5.8 million operating loss, far above the year-earlier loss of $48,000. During the quarter, Hunt slashed its truck unit’s fleet by 23%. At the same time, the company said, “continued soft demand and aggressive pricing from our competitors forced prices down,” resulting in a 2.4% drop in revenue per loaded mile, excluding fuel surcharge.

While truck business suffered, dedicated contract services posted $17.4 million in operating income, just 5% short of last year’s first quarter. The unit’s revenue fell 21% to $179 million.

Only the brokerage business, known as Integrated Capacity Solutions, delivered growth, with revenues rising 51% to $56 million. Operating income more than doubled to $4.1 million of the volume growth and lower costs to purchase transportation.

“J.B. Hunt’s operating performance was relatively strong, de-spite weak demand, with three of its four segments operating solidly,” Ed Wolfe, founder of Wolfe Research, said in an investor note. “However, all segments but integrated capacity solutions (off a small base) were down year over year.”

Landstar’s earnings fell 41% to $13.9 million, and revenue declined 23%. The company’s brokerage revenue fell 28%, and independent contractor revenue slipped 19%.

Werner reported that net income dropped 18% to $6.9 million, and revenue fell 23% to $394.5 million.

CSX first-quarter net income slid 30% to $246 million, reflecting a 17% drop in revenue and a matching volume decline.

Hunt’s profits were helped by a $4.8 million drop in interest expense that resulted from reducing debt by $236 million, or 27%, and lower interest rates. Net capital spending was $55 million, 8% below last year’s first quarter.

Hunt’s intermodal business reflected a 38% rise in moves on its Eastern network, where new service was added. Transcontinental freight business fell 4%.