J.B. Hunt told investors at a Morgan Stanley conference that Q3 earnings per share will fall 5% to 10% from Q2, hit by about $25 million in extra driver recruiting and bonus costs and at least $10 million more in fuel expenses. CFO Brad Delco and intermodal president Darren Field made the remarks September 15. There’s no release or filing behind them.
Whether J.B. Hunt's contract book can catch up to costs matters beyond one quarter. Intermodal and dedicated contracts make up 96% of its operating income, and both reprice slowly: intermodal rates trail truckload pricing by about two quarters, and dedicated deals mostly run five years with annual cost-based escalators. Intermodal bid season starts in October, with about 10% of contracts renewing in the fourth quarter and the rest spread evenly through the following three.
Fuel surcharges run on a one-week lag against spot prices. Diesel rose 10% from July to August and climbed in 8 of 11 weeks this quarter, according to Energy Information Administration data. Diesel averaged a record $6.29 a gallon in the week of September 14.
J.B. Hunt calls the cost increase “more cyclical than structural” and describes freight demand as “really strong,” with final mile the exception. “We are expecting our Q3 earnings to actually drop 5% to 10%,” Delco told Barron’s. At the midpoint, that puts EPS around $1.77, versus a $2.10 consensus, by FreightWaves’ math. The stock fell 10% to 12% on the news.
Intermodal currently runs 32% cheaper than truck, well above the typical 10-15% gap in the East and about 25% in the West, per SONAR. Other carriers are absorbing similar cost timing gaps: Hub Group's September 14 release posted an H1 operating loss from “higher fuel, rail and drayage costs incurred prior to rate increases implemented beginning in the third quarter.” Van spot rates, meanwhile, fell a record 8.4% in August to $2.19 a mile even as fuel surcharges rose, DAT reports.
J.B. Hunt’s own repricing catches up when bid season opens next month.
