J.B. Hunt controlling the controllable into 2026

The truckload business is seeing more mini-bid opportunities as some customers are struggling with service performance at other carriers and as shippers see a need to lockdown capacity given heightened regulatory enforcement on drivers. The unit has grown load counts by double-digit percentages in the past two quarters.

J.B. Hunt’s dedicated pipeline remains healthy and the company is seeing new customers inquire about service. Management said deals are taking longer to finalize from the time of inquiry, but new accounts are ramping to profitability a little faster. It estimates dedicated truck service to be a $90 billion total addressable market and it reiterated a goal for net truck additions of 800 to 1,000 annually.

Management said parts of its final-mile offering are performing well, but called out continued softness in demand for big-and-bulky delivery.

Why can’t J.B. Hunt have 2 rail partners in the East?

The company addressed the changing intermodal landscape following the Union Pacific (NYSE: UNP) – Norfolk Southern (NYSE: NSC) merger announcement. 

Darren Field, J.B. Hunt’s president of intermodal, said the company prefers the optionality of having two different Eastern rail providers, noting that each provides something that the other doesn’t. He said any recent share shift from Norfolk Southern to CSX (NASDAQ: CSX) is a consequence of new coast-to-coast service agreements signed between its Western rail partner, BNSF Railway (NYSE: BRK.B), and CSX. He emphasized that J.B. Hunt is “not actively looking for ways to shift business from one railroad to another.”

“We’re not out trying to work on transitioning market share from Norfolk Southern to CSX,” Field added. “That’s not part of our daily effort, and we don’t have anything in the works. I think there are a number of announcements that seem to be coming out from certainly BNSF and CSX over ways that they can work together.”

J.B. Hunt reiterated its primary goal is to move freight off the road and onto the rail. It said “best-ever” service across the network is helping with road-to-rail conversion, touting recent market share wins in the East. However, it acknowledged that still-depressed truck rates and modest fuel prices are weighing on overall intermodal demand.

Operating leverage to burst through in a recovery

J.B. Hunt has tightened the belt as the downturn lingers.

It outlined a $100-million cost reduction program on its second-quarter call, but said “internal targets are much greater than that.” It views the takeouts as structural cost elimination that won’t reverse when volumes return. (In comparison, J.B. Hunt’s last-12-months’ operating income was $842 million.)

Revenue was down slightly year over year in the third quarter but operating income grew 8% as enhanced productivity and efficiency initiatives took hold. Also, the company’s headcount sits 15% below the prior peak and many of those jobs won’t be coming back given AI- and other tech-related workflow enhancements. 

“I think that operational torque, or operational leverage, will show well in an environment where we’re recovering,” CFO Brad Delco said. “I feel confident that this team is set up to win regardless of what the environment is. I just don’t know what winning will look like in 2026, but I feel like we’re set up well.”

He said the company doesn’t have any outsized cash needs as it already has ample capacity for an upturn and annual maintenance capex is just $700 million (on operating cash flows of roughly $1.5 billion). That will allow the company to continue to repurchase shares (share count down 7.5% over the past two years) and fund the dividend, which it has consistently raised over the past 21 years.

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