J.B. Hunt reports 4.7% growth in revenue and a 4.5% increase in profits

Operating income decreased 17.0% excluding 2019 charges

J.B. Hunt Transport Services, Inc., announced Q3, 2020 net earnings of US$125.5 vs. Q3, 2019 net earnings of US$118.4 million, an increase of 6.0%. Included in the Q3, 2019 results were pre-tax charges of US$44.2 million related to arbitration, including legal and interest charges. Total operating revenue for the current quarter was US$2.47 billion, up 4.7% compared with US$2.36 billion for Q3, 2019. Revenue performance was primarily driven by a 25.0% increase in revenue per load in Integrated Capacity Solutions (ICS), a 34.0% increase in the number of stops in Final Mile Services (FMS), a 9.0% increase in loads in Dedicated (DCS), and a 14.0% increase in loads in Truck (JBT), partially offset by a 5.0% decrease in revenue per load in Intermodal (JBI) and 32.0% decline in fuel surcharge revenue. Current quarter total operating revenue, excluding fuel surcharges, increased 9.0% vs. the comparable quarter 2019.

Operating income for the current quarter totalled US$175.5 million, up 4.5% vs. US$167.9 million for Q3, 2019. Operating income in Q3, 2019 included US$44.2 million in pre-tax charges related to the final award in the arbitration with BNSF Railway Company (BNSF). Excluding these charges, operating income decreased 17.0% from Q3, 2019 primarily from increased rail purchase transportation costs, lower gross margins in ICS, increases in driver wages and recruiting costs, increased third-party and company dray costs, and continued investments in technology spend on new applications and legacy operating systems.

Intermodal (JBI) Q3, 2020 segment revenue was US$1.21 billion, down 2.0% as operating income reached US$108.4 million, up 22.0%. Overall intermodal volumes increased 2.0% vs. the same period in 2019. Eastern network loads grew 3.0%, while Transcon loads grew 2.0% compared to Q3, 2019. Volumes in the quarter were heavily constrained by rail congestion and service issues stemming from a large and sudden increase in demand and intermittent labour challenges in both the rail and truck networks. Revenue declined, reflecting a 5.0% decline in revenue per load, partially offset by the 2.0% load growth; which is the combination of mix, customer rates, and fuel surcharges. Excluding fuel, revenue per load was flat year over year. Operating income increased by 22.0% year over year, however the prior comparable period included US$44.2 million in charges related to the final award in the BNSF arbitration. Excluding those charges, operating income was down 18.0% year over year. The decline in operating income is attributable to higher rail purchased transportation costs, including costs to reposition empty containers, lower overall revenue per load, and higher dray costs stemming from dislocations in rail capacity and a tight labour and truck capacity environment. The current period ended with approximately 97,400 units of trailing capacity and 5,647 power units in the dray fleet.

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Dedicated Contract Services (DCS) Q3, 2020 segment revenue was US$553 million, up 1.0%, as operating income climbed to US$80.4 million, up 5.0%. Productivity, defined as revenue per truck per week, was flat vs. 2019. Productivity excluding fuel surcharge revenue increased 2.0% vs. 2019. A net additional 63 revenue producing trucks were in the fleet by the end of the quarter compared to the prior year. Customer retention rates remain above 97.0%. Benefits from increased productivity of assets, reduced driver turnover, fewer start-up costs, and lower travel and entertainment expenses, were partially offset by higher driver and account manager wages and benefits.

Integrated Capacity Solutions (ICS) Q3, 2020 segment revenue was US$431 million, up 28.0% as operating losses reached US$(18.3) million; compared to US$(5.6) million in Q3, 2019. Volumes increased 2.0% and revenue per load increased 25.0% due to customer freight mix changes and higher contractual and spot rates compared to Q3, 2019. Contractual volumes represented approximately 58.0% of the total load volume and 38.0% of the total revenue in the current quarter compared to 68.0% and 52.0%, respectively, in Q3, 2019. Of the total reported ICS revenue, approximately US$291.0 million was executed through the Marketplace for J.B. Hunt 360 compared to US$205.0 million in Q3, 2019. Operating income decreased primarily from lower gross profit margins. Gross profit margins decreased to 7.6% in the current period vs. 12.7% in the same period last year primarily from a competitive contractual pricing environment and tight supply dynamics that occurred throughout the quarter. ICS carrier base increased 14.0% vs. Q3, 2019.

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Final Miles Services (FMS) Q3, 2020 segment revenue was US$182.0 million, up 22.0%, as operating income reached US$2.1 million, up 13.0%. Stop count within FMS increased 34.0% during the current quarter vs. a year ago, primarily from the December 2019 acquisition and the addition of multiple customer contracts implemented throughout 2020. Productivity, defined as revenue per stop, decreased approximately 9.0% compared to the prior year period primarily from the shift in mix between the asset and asset-light nature of the additional contracts that were implemented. Operating income increased 13.0% over the prior year quarter driven primarily by increases in revenue from both the December 2019 acquisition and the addition of multiple customer contracts throughout 2020. Continued reductions in travel and entertainment compared to a year ago also benefited the current quarter that were partially offset by increased investment in service quality performance controls.

Truck (JBT) Q3, 2020 segment revenue was US$109.0 million, up 16.0%. Operating income fell to US$2.9 million, down 55.0%. Revenue excluding fuel surcharge revenue increased 19.0%, primarily from a 14.0% increase in load count and a 5.0% increase in revenue per load excluding fuel surcharge revenue compared to a year ago. Revenue per loaded mile excluding fuel surcharge revenue increased approximately 4.0% year-over-year while comparable contractual customer rates were down approximately 1.0% compared to the same period 2019. At the end of the period, JBT operated 1,713 tractors and 8,245 trailers compared to 1,896 and 6,826 one year ago, respectively. Operating income decreased 55.0% compared to the same quarter 2019. Benefits from increased load counts were offset by increases in purchased transportation expense. In addition, higher personnel cost and increased investment in technology, both from the continued transition and expansion of 360box, contributed to the operating income decrease.

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