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J.B. Hunt Q3 Revenue up 7%; Operating Income Down 6%

October 18, 2016 By: Trucking News Staff Tags: Fleet Management, News
J.B. Hunt Q3 Revenue up 7%; Operating Income Down 6%

J.B. Hunt Transport Services Inc., announced third-quarter 2016 net earnings of $109.4 million, or diluted earnings per share of 97 cents versus third-quarter 2015 net earnings of $115.1 million, or 99 cents per diluted share.

Total operating revenue for the current quarter was $1.69 billion, compared with $1.59 billion for the third quarter 2015. The company reported a load growth of 7 percent in Intermodal (JBI), a 2.9 percent increase in revenue producing trucks and improved asset productivity in Dedicated Contract Services (DCS), an 88 percent increase in load volume in Integrated Capacity Solutions (ICS) and a 4 percent increase in truck count in Hunt’s Truck (JBT) business segment.

This was partially offset by lower customer rates in JBI, ICS and JBT and tepid customer demand, contributed to the increase in consolidated revenue compared to prior year. Current quarter total operating revenue, excluding fuel surcharges, increased 8.4 percent versus the comparable quarter 2015.

Operating income for the current quarter totaled $183 million versus $194 million for the third quarter 2015. Operating income decreased from third quarter 2015 primarily from lower customer rates in JBI, ICS and JBT, increased rail purchase transportation rates, lower box turns, increases in driver wages and recruiting costs, losses on the sale of used equipment (versus gains in 2015), increased legal and consulting costs and higher equipment maintenance and ownership costs.

Intermodal (JBI): Overall volumes increased 7 percent over the same period in 2015. The Eastern network realized load growth of 5 percent and Transcontinental loads grew 8 percent over the third quarter 2015 as West Coast outbound freight growth outpaced the rest of the network and western rail service continued a year over year improvement trend. Revenue increased 2 percent reflecting the 7 percent volume growth and an approximate 4.2 percent decrease in revenue per load, which is the combination of changes in customer rate, freight mix and fuel surcharges. Revenue per load excluding fuel surcharges decreased approximately 2 percent compared to third quarter 2015.

Operating income decreased 7 percent over prior year. Benefits from improved volumes, improved operating efficiencies from network balance and reduced reliance on third-party dray carriers were offset by lower customer rates, increases in rail purchased transportation rates, equipment ownership costs including lower box utilization, increased insurance and claims costs and increased costs to attract and retain drivers. The current period ended with approximately 82,800 units of trailing capacity and 5,280 power units assigned to the dray fleet.

Dedicated Contract Services (DCS)

DCS revenue increased 6 percent during the current quarter over the same period in 2015. Productivity (revenue per truck per week) increased by approximately 3 percent versus 2015. Productivity excluding fuel surcharge revenue increased approximately 4 percent from a year ago primarily from improved integration of assets between customer accounts, fewer unseated trucks, increased customer supply chain fluidity and customer rate increases.

A year-over-year net addition of 205 revenue-producing trucks, 50 net additions sequentially from second quarter 2016, were in the fleet by the end of the quarter. Approximately 75 percent of these additions represent private fleet conversions versus traditional dedicated capacity services and primarily reflect new contract implementations in this and prior periods. Customer retention rates remain above 98 percent.

Integrated Capacity Solutions (ICS)

ICS revenue increased 35 percent in the current quarter versus the third quarter of 2015. Load volume increased 88 percent while revenue per load decreased 28.5 percent due to lower fuel prices, freight mix changes driven by customer demand and lower customer rates on contractual business. Contractual volumes represented approximately 75 percent of total load volume and 64 percent of total revenue in the current quarter compared to 66 percent and 60 percent, respectively, in third quarter 2015.

Truck (JBT)

JBT revenue was flat from the same period in 2015. Revenue excluding fuel surcharge increased 2 percent, primarily from a 4 percent increased truck count and a 2 percent increase in utilization offset with an approximate 4 percent decrease in rate per mile excluding fuel mostly from customer driven freight mix changes. Core customer rates were flat compared to the same period in 2015. At the end of the period, JBT operated 2,183 tractors compared to 2,100 a year ago.

Operating income decreased by 55 percent compared to third-quarter 2015. Favorable changes from an increased fleet count and improved utilization were more than offset by lower customer rates per mile, increased equipment maintenance costs, higher safety and insurance costs and increased driver hiring costs compared to third quarter 2015.