Business & Investment

Supply chain hurdles not high enough to thwart JB Hunt’s Q3 beat

Labor was a major issue at JB Hunt Transport Services’ third-quarter earnings briefing with analysts on Friday. The management of Lowell, an Arkansas-based shipping company, said many of the obstacles in the US supply chain were rooted in a shortage of workers.

“The hardest thing we pay attention to is the customer’s warehousing,” says JB Hunt (NASDAQ: JBHT) Intermodal head Darren field. “There is a serious bottleneck here. The ability to unload the demand that customers have.”

Earlier that day, the company announced a earnings per share of $ 1.88. This is 11 cents above the analyst’s estimate. The results were also 27 cents higher than in the second quarter and 70 cents better than in the year-ago quarter.

The stock of JB Hunt jumped out in the news. JBHT’s share was 9.7% higher at 1:45 pm EDT on Friday, compared to the S & P 500, which rose 0.7%.

The company expects peak seasons to deepen in November and December due to challenges across the transportation network. In short, inventory replenishment will be a favorable catalyst for the first quarter.

Table: JB Hunt Key Performance Indicators-Integration

Labor headwinds limit strong intermodal performance

The delay in the time it took for the warehouse to unload the container and bring the equipment back into operation was apparent in the quarter. In the company’s intermodal segment, box turns fell five-fold on average quarterly, compared to 5.6-fold the previous year. The JB Hunts box was spinning 1.65 times a month in the second quarter. The rate fell to 1.62 this quarter.

JB Hunt has begun to more stringently charge accessories for excessive delays to allow customers to flip boxes faster. However, Mr. Field said the outcome of the initiative was “various,” and the goal was “to move more volume and provide more capacity to customers, which was not the case in the quarter.” Said.

Intermodal load fell 6% year-over-year in the third quarter, but revenue increased 17% to $ 1.41 billion. The reason was a 24% increase in revenue per load due to a combination of improved mixes, higher tariffs and higher fuel surcharge revenues.

According to management, the rise in core prices was significant, covering cost inflation (operating costs increased by 20% per load). Management did not provide details on how the ancillary programs affected revenue per load. He said the rise in core prices gradually accelerated in the third quarter, outpacing the rate of increase in costs.

In the third quarter, JB Hunt added 2,853 marine containers to its fleet of over 102,000 units. This is part of a larger program to reduce network congestion. In total, the company plans to deliver 12,000 containers by early 2022, with approximately 8,000-9,000 units in the fleet by the end of the year.

Mr Field said it was too early to provide a commentary on the 2022 intermodal fare, as the costs of drivers’ wages and transportation purchased are still fluctuating.

He also said it was too early to determine when the box turn could improve.

“Every day we focus on ways to improve that number that is influencing our customers’ behavior. Indeed, our rail providers move somewhat slower than we expected. “I have,” Field said. “At the end of the second quarter, you said you couldn’t imagine it getting worse, and you know what it did.”

JB Hunt’s major rail partner BNSF (NYSE: BRK.B) And Norfolk Southern (NYSE: NSC) Train speeds decreased by 5% and 6%, respectively, but dwell times increased by 2% and 15%, respectively, in the quarter.

Despite headwinds, the intermodal utilization rate improved by 270 basis points to 88.3%.

Table: JB Hunt Key Performance Indicators – Intermodal

Expanding market share, double-digit growth in all segments

Dedicated revenue was $ 665 million, up 20% year-on-year, as the average number of trucks increased by 12% and revenue per truck increased by 7%. The division’s quarterly addition of 744 revenue-generating trucks led to a surge in contract execution costs. Increasing driver and non-driver compensation was also a headwind. OR eroded 280bps to 88.2%.

Nick Hobbes, COO of JB Hunt and president of contract services, said the challenge of finding workers is widespread.

“It’s all over. It’s a maintenance technician and a driver. Wages will be under tremendous pressure. I think it’s been going on for quite some time throughout the supply chain,” Hobbes commented. ..

A similar headwind of contract opening was seen in the final mile segment. Operating profit was $ 1.3 million, down 39% year-on-year, well below the $ 11 million recorded in the previous quarter. In addition to the costs associated with onboarding new businesses, higher purchase transportation costs and lower volumes by some customers struggling with product availability were obstacles.

Management said the company’s core legacy final mile business operates within a long-term margin target of 4% to 8%.

Table: JB Hunt Key Performance Indicators – Dedicated and Final Miles

JB Hunt’s trucking division revenue was $ 204 million, up 87% year-over-year. Revenue per mile loaded, including fuel, increased 38% to $ 3.70, and JB Hunt’s contract customers’ revenue increased 29%.

This was the first quarter of the sector’s revenue of $ 200 million since 2007.

The company began shrinking truck capacity in this segment over a decade ago to grow other products like dedicated. We relied on our investment in the Drop Trailer Pool 360box to increase our bottom line and at the same time reduce the number of trucks assigned to our department by 60%.

TL added an additional 900 trailers from the second quarter to the third quarter. This brings the fleet closer to 10,000 units.

FCMs recorded a 55% year-over-year increase in revenue, despite a 4% increase in load. Revenue per load surged 48% as rates continued to rise. Operating profit of $ 15 million was a recovery from the $ 18 million loss recorded a year ago.

John Roberts, President and CEO, said: “Like you, we don’t know, so it’s very poor to predict when that will happen. But if someone tells me in the second half of 22 years, things will loosen a bit. , I’m not surprised, but at the same time we have to wait and see. “

Table: JB Hunt Key Performance Indicators-Intermediary and Truck Loading

Click here to see more Freight Waves articles by Todd Maiden.

Supply chain hurdles not high enough to thwart JB Hunt’s Q3 beat Supply chain hurdles not high enough to thwart JB Hunt’s Q3 beat

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