Intermodal: Freight’s MUST-HAVE in Volatile Markets

Intermodal conversion is no longer an option but a necessity for shippers, driven by past supply chain chaos and persistent fuel costs. FreightWaves Finance Editor Todd Maiden breaks down J.B. Hunt’s strategic plays in intermodal and dedicated, revealing how major carriers are navigating current market headwinds and positioning for future growth. Learn which segments are poised to win in the coming quarters and why industrial activity will play a crucial role.

J.B. Hunt Transport Services flagged a 5% to 10% sequential step-down in third-quarter earnings per share from the second quarter at a recent investor conference, putting the company roughly flat year over year. That disclosure, combined with headwinds from diesel cost run-ups and driver-related expenses, may have caught Wall Street off guard — but analysts tracking the stock say the market misread the story. While most truckload and intermodal carriers are only one quarter into their earnings recovery, J.B. Hunt began its turnaround in the third quarter of 2025, making this its fourth consecutive quarter of year-over-year improvement.

The company launched a $100 million cost-reduction initiative roughly a year ago — a program that had already grown to more than $130 million as of last quarter. Headcount is being managed through natural attrition rather than layoffs, and AI-driven lean initiatives are in place. For the broader carrier universe, analysts are tracking roughly 20% average earnings growth per company this quarter, following 25% year-over-year growth across the space in the second quarter.

Fuel was cited as a significant but transitory drag. Nine of the 13 weeks in the third quarter saw diesel prices step higher sequentially, causing carriers to chase costs even with fuel surcharges in place. Once prices stabilize, that headwind is expected to reverse. Driver additions in J.B. Hunt’s dedicated segment were described as growth-oriented spending — prefunding future capacity rather than a sign of structural cost pressure.

“Modal conversion is no longer something we’ll contemplate. It’s really a necessity. But I think there’s some scars there from what it was in the past.”

Intermodal’s October 1 bid season is the most closely watched near-term catalyst. Volumes are already up mid-single digits this quarter, even as drayage driver availability is acting as a ceiling on further growth. Contract pricing, which lagged through a soft 2023 and a flattish 2024, is expected to inflect materially this cycle. J.B. Hunt’s intermodal operating ratio has already improved from a trough of 93.6 to approximately 91, against a long-term target of 88 to 90 — and that progress has come without meaningful price increases. Key customers including Walmart, Amazon, and Home Depot require incremental, cycle-based rate negotiations rather than spot-market-style repricing, which limits how quickly rates can move.

In LTL, public carriers including Old Dominion, XPO, and Saia weathered 3.5 years of industrial softness but maintained pricing power throughout. LTL tonnage inflected positive year over year in March and has continued to accelerate, coinciding with the ISM manufacturing PMI turning positive in January and remaining in growth territory for all nine months of the year. Carriers have been running at more than 30% excess door capacity while investing heavily in terminal networks; analysts expect that slack to begin absorbing, driving outsized margin gains given the sector’s high fixed-cost structure.

Amazon’s stated ambitions in LTL drew skepticism. The overall LTL market is a $60 billion total addressable market — large in absolute terms but small relative to global parcel, where the TAM potentially exceeds $1 trillion. Amazon currently operates roughly 30 terminals configured primarily for inbound freight rather than the cross-dock, pickup-and-delivery, and linehaul infrastructure a national LTL network requires. Regional carriers, meanwhile, are said to be at or near capacity limits in their terminal networks, a dynamic that favors large national players sitting on substantial excess capacity.

• J.B. Hunt warned of a 5%-10% sequential EPS decline in Q3, but its cost-takeout program has grown from $100M to over $130M and its earnings recovery is four quarters old — a full year ahead of most peers.
• Intermodal volumes are up mid-single digits this quarter even as drayage driver shortages cap growth; October 1 bid season is seen as the critical test for whether contract rates can inflect materially after two soft years.
• LTL tonnage turned positive year over year in March and has accelerated alongside a manufacturing PMI that has been in growth territory all nine months of the year, with carriers running 30%-plus excess door capacity poised to leverage fixed-cost networks.

This Summary is generated thanks to a transcription of the interview, for the full interview please enjoy the video above.