Soft Pricing, Rigid Costs Diminish 1Q Profits for Hub Group

Sandwiched between “soft pricing” and unyielding costs, intermodal, trucking and brokerage company Hub Group reported a significant decline in first-quarter net income even as revenue increased.

The company posted net income of $10.3 million, or 31 cents a share, on quarterly revenue of $893.4 million. For the first three months of 2016 Hub earned $18 million, or 51 cents, on revenue of $805.6 million.

Based in Oak Brook, Ill., Hub ranks No. 8 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers.

“We are experiencing a soft pricing environment due primarily to excess truck capacity and extraordinarily aggressive intermodal pricing, particularly in the West. At the same time, our rail transportation costs continue to increase, further compressing earnings,” the April 26 earnings statement said.

Hub’s transportation costs rose to $791.9 million from $697.5 million in the year-ago quarter. That pushed down net revenue — gross revenue less the cost of purchased transportation — to $101.6 million in the recent quarter from $108.4 million.

The company’s smaller Mode Transportation division, which provides freight forwarding and several types of brokerage, experienced only a 12% decline in operating profit.

The far bigger loss was in the larger Hub division, where operating profit plunged 48.4%.