J.B. Hunt missed the mark, despite solid profits

J.B. Hunt Transport Services posted solid financial results for its second quarter ending June 30, though it slightly missed the guidance set by Wall Street analysts.

The Lowell-based transport company earned $87.69 million, up 6.3% from the same period a year ago. Net income equaled 73 cents per share, up from the 67 cents earned last year.

Wall Street expected J.B.Hunt to post net earnings of 74 cents a share on sales of $1.4 billion. The company also fell short on the revenue mark with $1.382 billion in sales reported in the quarter. The estimate was $1.4 billion.

Investors weren’t concerned with the miss as shares of J.B. Hunt traded higher on Monday (July 15). Shares traded at $76.37, up 64 cents in the afternoon session in heavy volume. The increase also was up against concerns of slowing GDP and disappointing retail sales which were also reported on Monday.

Part of the reason Hunt missed expectations is because the cost of doing business has increased as it continues to ramp up hiring in its Dedicated Contract Services division. The company said it’s preparing to convert two private fleet contracts which resulted in $2.5 million in additional spending. Those expenses are front-end loaded but will be mitigated in the coming quarters.

The firm also took a $2.4 million write-off from technology which it has abandoned as well as a $1.5 million loss relating to two train derailments. Higher driver costs and recruitment wages also rose in the quarter.

Total operating income in the quarter was $147.4 million, up from $137.2 million a year ago.

INTERMODAL
The intermodal – truck via rail – division of J.B. Hunt continues to be the catalyst for strong earnings again this quarter. Hunt’s intermodal segment posted revenue of $854.74 million in the second quarter, up 12% from a year ago. This segment was responsible for 75% of the company's total sales in the quarter.

Operating income totaled $110.67 million, rising 19%, year-over-year. Overall volumes and revenue each increased 12% over the same period in 2012 in an environment of moderating fuel prices and less seasonally volatile freight demand, the company noted.

The firm grew its Eastern network 14% and transcontinental growth was 11% over the second quarter 2012.

Hunt reports steady demand and lower insurance costs which helped to buoy revenue higher.

The period ended with 61,911 units of trailing capacity and 3,952 power units available to the dray fleet, according to Hunt.

DEDICATED CONTRACT SERVICES
Hunt’s DCS division posted $302.62 million in revenue for the quarter, up 13% from a year ago. DSC sales totaled 22% of the company's total revenue in the quarter.

Operating income was $29.7 million, down 11% because of the previously mentioned expansion costs.

The company said new accounts provided a net additional 863 revenue-producing trucks by the end of the quarter compared to prior year. The additional trucks are needed as the firm ramps up for two large private fleet conversions which will be completed by September. The total cost of these conversions is estimated to be in excess of $3.5 million.

INTEGRATED CAPACITY SOLUTIONS
Hunt’s non-asset based brokerage division posted segment revenue of $131.82 million in the quarter, up 20% from a year ago. This segment comprised 10% of the company total revenue in the quarter.

The ICS segment benefited from a 29% increases in load volume, related to a boost in less-than-truckload business. Contractual business was approximately 60% of total load volume in the current period and comparable to second quarter 2012.

Operating income  of $4.16 million increased 113% over the same period 2012 primarily due to increased revenue and improvement in gross profit margin. Gross profit margin increased to 11.8% in the current quarter versus 10.6% last year.

The segment also had added personnel costs with the opening of two new branch locations in the quarter.

ICS’s carrier base increased 10% and the employee count increased 8% over the second quarter 2012.

TRUCK LOSSES
Hunt’s truckload division posted revenue of $101 million in the quarter, down 20% from a year ago as the firm moves more freight to intermodal.

Second quarter operating income tumbled 67% to $2.95 million as the segment reduced its fleet size by 16% also ran 10% shorter routes which also hindered revenue.
Hunt reports rates from consistent shippers decreased 0.6% from a year ago.

At the end of the quarter the segment has 2,018 tractors, down from 2,396 a year ago. The trucking segment revenue was just 7% of the company's total sales in the quarter.