J.B. Hunt beat second-quarter earnings estimates and told shippers it plans to raise intermodal contract rates this fall. For the country’s largest domestic intermodal carrier, that pricing signal matters well beyond its own book.
The numbers:
A record 578,072 intermodal loads, up 10%
Segment revenue up 22% to $1.75 billion
EPS of $1.91 and revenue of $3.50 billion, both above estimates
Shares rose about 8% the next morning
Why now: Management said truck-to-rail conversion is running at its highest level in more than a decade, pushed along by higher fuel costs and tight trucking capacity. Rail currently runs about 30% cheaper than a comparable truckload, and it usually takes savings of 10% to 15% to convince a shipper to switch. The company called the opportunity in its eastern network "massive."
The catch: The gains appear to be concentrated at J.B. Hunt rather than spread across the rail industry. Knight-Swift and Schneider both posted flat-to-negative intermodal volumes last quarter, which suggests J.B. Hunt is taking share rather than riding a rising tide. Both companies report second-quarter earnings on July 22.
The rest of the ledger: The picture was not uniformly strong. J.B. Hunt's brokerage unit turned a small profit after a long stretch of losses, while its truckload segment slipped into an operating loss on higher purchased-transportation costs. As the first major freight earnings report of the season, the results also offer an early read on whether the two-year freight downturn is finally lifting.
