Typically, rising truckload rates and diesel prices prompt shippers to consider shifting freight from road to rail. That hasn’t been the case yet, J.B. Hunt Transport Services said at an investor conference on Tuesday.
Despite a 30% run up in fuel prices since the start of the Iran conflict, little has changed, said Darren Field, J.B. Hunt president of intermodal, at the J.P. Morgan Industrials Conference in Washington, D.C. He said most shippers don’t view energy markets as having structurally changed, noting that the price spikes haven’t begun to shape customer decisions yet.
Intermodal currently offers significant cost savings over TL, with FreightWaves data showing the mode is 22.8% cheaper. This is above a recent cost savings range of 10% to 15%.
Field didn’t provide any indication on how intermodal bid season will play out this year, other than to say that it’s a “competitive environment.” He noted all players are protecting market share as the industry awaits the outcome of Union Pacific’s (NYSE: UNP) planned merger with Norfolk Southern (NYSE: NSC).
“Everybody wants to grow and everybody wants to repair margins at the same time,” Field said.
J.B. Hunt’s (NASDAQ: JBHT) intermodal unit saw margin improvement (both sequential and year-over-year) for a second straight time in the fourth quarter, even as yields remained under pressure. A 91.2% operating ratio (8.8% operating margin) in the recent quarter was just 120 basis points off the low end of the company’s long-term margin target (10% to 12%). Cost takeouts and other efficiency initiatives helped drive the improvement.
Field said that it’s not just about higher rates. The company is focused on network balance and improving revenue quality. Taking incremental volume on some lanes will help cover fixed costs. In addition, customers are exhibiting flexibility with pickup and delivery schedules where feasible, allowing J.B. Hunt to improve drayage utilization and run a more efficient network.
On the fourth-quarter call in January, it said the bridge to the long-term target requires one point of margin from lower costs, better volumes and higher yields (300 bps).
Customers keeping inventories lean as truck capacity exits
Despite the rapid exit of truck capacity, J.B. Hunt’s customers are still keeping inventory levels relatively low. The tightest freight market since the pandemic could expose supply chains to renewed vulnerabilities once demand recovers.
“It wouldn’t take a lot of new demand to create an environment where customer inventory wasn’t quite where they wanted it, when they wanted it,” Field said.
Management from the company said a month ago that demand was running a little ahead of what customers had originally signaled. Field said Tuesday that some of the outperformance was tied to inventory positioning and not an indication that its customers are now expecting higher sales for the year.
He noted shippers were able to comfortably operate just-in-time inventory strategies through the downturn as transportation capacity was readily available. Also, many shippers have been able to reduce stock levels to mitigate higher interest rates (inventory carrying costs) without a fear of losing sales.
However, peak season and severe winter storms showed how quickly the market could become stressed. Even after the events passed, tender rejections remained well above seasonal norms.
J.B. Hunt estimates that 5% to 12% of CDL holders could be forced out over a three- to four-year period that began in April 2025. It pointed to English-language proficiency requirements and non-domiciled CDL restrictions as primary catalysts, also noting that heightened enforcement of cabotage rules has discouraged foreign drivers from misusing their B-1 visas.
Crackdowns on ELD providers and forced closures of driver schools are also curbing truck capacity.
The ultimate impact of the 2026 bid season won’t be known for at least a couple of months. Many public TL carriers are expecting mid-single-digit contractual rate increases, or higher. Rising fuel costs, which may deter company drivers from transitioning to owner-operator status and thus minimize capacity expansion, could also limit how far carriers can push rates this year.
The duration of the conflict will likely determine the impact that rising gas prices (up 24% since the war began) have on consumer spending.
J.B. Hunt reports first-quarter results on Apr. 15.
Shares of JBHT were off 1.2% on Tuesday compared to the S&P 500, which was up 0.3%.
Freight Fraud Symposium
Double brokering. AI deepfakes. Identity theft. Freight fraud is an existential threat to the industry. Get ahead of it.
Supply Chain AI Symposium
Past the hype. Join operators, founders, and enterprise leaders figuring out how to deploy AI in supply chain.
Future of Rail Symposium
Reshoring is rewriting freight demand. Join shippers, rail executives, and government officials to shape the next decade.
Double brokering. AI deepfakes. Identity theft. Freight fraud is an existential threat to the industry. Get ahead of it.
Rock & Roll Hall of Fame • Cleveland, OH Register NowPast the hype. Join operators, founders, and enterprise leaders figuring out how to deploy AI in supply chain.
The Old Post Office • Chicago, IL Register NowReshoring is rewriting freight demand. Join shippers, rail executives, and government officials to shape the next decade.
The Signal at Chattanooga Choo Choo • Chattanooga, TN Register Now