LOWELL, Ark. — One of the nation’s top carriers reported a slight decline in earnings.
J.B. Hunt Transport Services Inc. announced via a recent media release its second quarter 2024 United States Generally Accepted Accounting Principles (U.S. GAAP) net earnings of $135.9 million, or diluted earnings per share of $1.32 versus second quarter 2023 net earnings of $189.6 million, or $1.81 per diluted share.
Total operating revenue for the current quarter was $2.93 billion, compared with $3.13 billion for the second quarter 2023, a decrease of 7%, according to its release.
J.B. Hunt officials stated that the decline in revenue was primarily driven by a 5% decrease in gross revenue per load in Intermodal (JBI) and a decline in load volume of 25% in Integrated Capacity Solutions (ICS), 9% in Truckload (JBT), and 9% in Dedicated Contract Services (DCS®).
The news wasn’t all bad. The declining items were partially offset by Final Mile Services (FMS) revenue growth of 5%, which J.B. Hunt stated was primarily driven by new contracts implemented over the past year, and a 5% increase in revenue per load in ICS. Current quarter total operating revenue, excluding fuel surcharge revenue, decreased 6% versus the comparable quarter 2023.
Operating income for the current quarter has also decreased 24% to $205.7 million versus $270.7 million for the second quarter 2023. The decrease in operating income was primarily due to lower revenue, and higher insurance and claims, equipment-related, and certain personnel-related expenses.
Operating income as a percentage of gross revenue decreased year-over-year as a result of the same aforementioned expense items, partially offset by lower rail and truck purchased transportation costs as a percentage of gross revenue.
Net interest expense for the current quarter increased approximately 38% from the second quarter 2023 due to higher effective interest rates and consolidated debt balance, partially offset by higher interest income.
The effective income tax rate was 26.8% in the current quarter compared to 26.0% in the second quarter 2023. We continue to expect our 2024 annual tax rate to be between 24.0% and 25.0%.
Intermodal (JBI)
- Second Quarter 2024 Segment Revenue: $1.41 billion; down 5%.
- Second Quarter 2024 Operating Income: $99.2 million; down 31%.
Intermodal numbers were a bit back and forth, but the result was an overall decline.
While intermodal volume decreased 1% over the same period in 2023, transcontinental network loads increased 4%, and eastern network loads decreased 7% compared to the second quarter 2023.
J.B. Hunt stated that while experiencing some seasonal build in demand through the quarter, overall performance continued to be pressured by the soft freight market and its impact on over-the-road truck competition in the eastern network.
Segment gross revenue decreased 5% from the prior-year period, reflecting the 1% decrease in volume and a 5% decrease in gross revenue per load, resulting from changes in customer rates, fuel surcharge revenue, and the mix of freight. Revenue per load excluding fuel surcharge revenue decreased 4% year-over-year.
J.B. Hunt’s July 17 release summarized that operating income decreased 31% compared to the second quarter 2023 primarily from a combination of lower yields and the underutilization of assets in the network. JBI segment operating income as a percentage of segment gross revenue “declined versus the prior-year period as a result of increases in professional driver and non-driver wages and benefits, ownership costs of underutilized equipment, higher equipment and maintenance expenses, and higher insurance and claims expense, as a percentage of gross revenue,” the release stated. “During the period, we onboarded 1,862 new pieces of trailing equipment. We ended the quarter with approximately 121,200 containers and 6,200 power units in the dray fleet.”
Dedicated Contract Services (DCS)
- Second Quarter 2024 Segment Revenue: $851 million; down 4%.
- Second Quarter 2024 Operating Income: $96.4 million; down 15%.
J.B. Hunt’s release stated that Dedicated Conrtract Services (DCS) revenue decreased 4% during the current quarter over the same period 2023 driven by a 1% decline in average trucks combined with a 3% decline in productivity (revenue per truck per week).
Productivity excluding fuel surcharge revenue decreased 3% from a year ago driven primarily from lower utilization and increases in idled equipment, partially offset by contracted indexed-based price escalators.
According to J.B. Hunt’s release, on a net basis, there were 339 fewer revenue-producing trucks in the fleet by the end of the quarter compared to the prior-year period and 365 fewer versus the end of the first quarter 2024. Customer retention rates are approximately 88%, largely reflecting downsizing of fleets and to a lesser extent account losses, as compared to the prior-year period.
Operating income decreased 15% from the prior-year quarter primarily from lower revenue, higher insurance and claims, equipment-related and bad debt expenses and higher new account start-up costs as compared to the prior-year period. These items were partially offset by lower maintenance costs and the maturing of new business onboarded over the past trailing 12 months.
Integrated Capacity Solutions (ICS)
- Second Quarter 2024 Segment Revenue: $270 million; down 21%.
- Second Quarter 2024 Operating Loss: $(13.3) million; vs. $(4.4) million in Q2’23.
ICS revenue declined 21% during the current quarter versus the second quarter 2023. Overall segment volume decreased 25% versus the prior-year period.
By slight contrast, revenue per load increased 5% compared to the second quarter 2023 due to increases in both contractual and transactional rates as well as changes in customer mix.
“Contractual volume represented approximately 61% of the total load volume and 59% of the gross segment revenue in the current quarter compared to 66% and 64%, respectively, in second quarter 2023, per the release.
Operating loss was up considerably at $13.3 million compared to an operating loss of $4.4 million in the second quarter 2023.
“The increase in operating loss was largely driven by a $4.9 million decrease in gross profit, higher insurance and claims costs, and integration and transition costs related to the purchase of the brokerage assets of BNSF Logistics,” officials said. “These items were partially offset by lower personnel-related expenses and reduced technology costs. Gross profit declined 11% versus the prior-year period as a result of lower revenue, despite gross profit margins improving to 14.8% compared to 13.0% in the prior-year period. This reflects intentional yield management and discipline during bid season and better execution on capacity procurement. The ICS carrier base decreased 24% year-over-year, largely driven by changes to carrier qualification requirements to mitigate cargo theft.”
Final Mile Services (FMS)
- Second Quarter 2024 Segment Revenue: $235 million; up 5%.
- Second Quarter 2024 Operating Income: $19.8 million; up 33%.
FMS revenue’s increase of 5% was a big bright spot for JB Hunt it its report. The comparison data comes from the same period in 2023.
J.B. Hunt said the increase was primarily driven by multiple new contracts implemented over the past year.
This was partially offset by ongoing efforts to improve revenue quality and profitability across various accounts which resulted in some loss of business in addition to general weakness in demand across some of the end markets served,” the release stated.
Operating income increased 33% compared to the prior-year period. Second quarter 2024 included a $1.1 million net benefit from two offsetting claim settlements.
According to J.B. Hunt’s release, “excluding this impact, operating income increased primarily from higher revenue and lower personnel, equipment-related, and bad debt expenses compared to the prior-year period. These items were partially offset by higher building maintenance expense and loss on sale of equipment as compared to the prior-year period.”
Truckload (JBT)
- Second Quarter 2024 Segment Revenue: $168 million; down 12%.
- Second Quarter 2024 Operating Income: $3.5 million; down 7%.
JBT revenue decreased 12% compared to the same period in the previous year. Revenue excluding fuel surcharge revenue decreased 13% due to a 9% decline in load volume and a 4% decline in revenue per load excluding fuel surcharge revenue. Total average effective trailer count decreased by approximately 500 units, or 4% versus the prior-year period. Trailer turns in the quarter were down 5% from the prior period primarily due to weaker overall market demand compared to the second quarter 2023.
JBT operating income decreased 7% to $3.5 million compared to the second quarter 2023. The decrease in operating income was primarily driven by the decline in revenue. JBT segment operating income as a percentage of segment gross revenue improved slightly year-over-year as a result of overall cost management initiatives, partially offset by higher third-party capacity cost and insurance and claims expense as a percentage of gross revenue.
Cash Flow and Capitalization
As of June 30, 2024, the company had approximately $1.48 billion outstanding on various debt instruments compared to $1.45 billion at June 30, 2023, and $1.58 billion at Dec. 31, 2023, according to the press release.
The company’s net capital expenditures for the six months ended June 30, 2024, did sharply decline to an approximated $409 million compared to $854 million for the same period 2023. At June 30, 2024, the company had cash and cash equivalents of approximately $54 million.
“In the second quarter 2024, we purchased approximately 1,225,000 shares of common stock for approximately $203 million,” the release stated. “At June 30, 2024, we had approximately $163 million remaining under our share repurchase authorization. Actual shares outstanding at June 30, 2024 approximated 102.0 million.”
Bruce Guthrie is an award-winning journalist who has lived in three states including Arkansas, Missouri and Georgia. During his nearly 20-year career, Bruce has served as managing editor and sports editor for numerous publications. He and his wife, Dana, who is also a journalist, are based in Carrollton, Georgia.
