First look: After taking out the BNSF charge, steady solid growth at J.B. Hunt

J.B. Hunt’s performance for the fourth quarter of 2018 should probably be looked at primarily through the lens of its revenue because its bottom line was heavily impacted by charges it took as part of its ongoing dispute with BNSF. Net income for the company was $88.7 million compared to $385.3 million in 2017, but the drop included the $134 million charge the company took as a result of an arbitrator’s ruling in the BNSF case. Fourth quarter revenue was $2.32 billion, slightly higher than consensus forecasts and it was up 16 percent from a year earlier.

—On an operating basis, the company made $122.7 million compared to $145.8 million and that fourth quarter figure did include the liability charge of $134 million. But J.B. Hunt also said its fourth quarter operating income was negatively affected by paying more money to personnel – “outsourced intermodal dray, increased driver and independent contractor recruiting costs, and higher salary and wage expenses for non-driving personnel.”

—Intermodal volumes were down 1 percent from the corresponding quarter of 2017. But revenue of $1.26 billion was up 15 percent because Hunt recorded a 16 percent increase in revenue per load and had improvement in “the combination of freight mix, customer rate increases and fuel surcharges.” Revenue per load without fuel surcharges was up about 15 percent from the previous year, Hunt said. In terms of where it saw growth and decline, loads on its eastern network were up 5 percent and transcontinental volumes were down 4 percent from 2017’s fourth quarter.

—The dedicated unit had a strong quarter. Its revenue of $596 million was up 25 percent from a year earlier and its operating income was up 70 percent. Productivity as measured in revenue per truck per week was up 7 percent over the fourth quarter of 2017. After taking out fuel surcharges, Hunt said its 5 percent growth in that division came from “customer rate increases, improved integration of assets between customer accounts and increased customer supply chain fluidity.” Hunt – which made a significant acquisition in the final-mile segment earlier this month by buying Cory 1st Choice Home Delivery – said it increased the number of vehicles in the dedicated fleet by 1,388 from last year and 458 just since the third quarter. Customer retention is 32 percent, and 32 percent of the additional fleet vehicles represents the conversion of private fleets into Hunt vehicles. Trucks from the Cory acquisition are not be in those numbers.

—The truckload division of Hunt saw a 21 percent jump in revenue to $118 million. Hunt is primarily an intermodal company; that is driven home by the fact that its truckload division’s revenue is about one-tenth of the revenue of its intermodal division. Truck revenue excluding fuel surcharges was about 21 percent more than last year, and revenue per load was up 10 percent. It got to that point because there was an 18 percent increase in rates per loaded mile combined with a 6 percent reduction in the length of haul. Contractual customer rates were up 15 percent from a year ago. The tractor count was 2,112 at the end of the year compared to 2,032 at the close of 2017.

—Integrated Capacity Solutions, which includes the J.B. Hunt 360 tool, showed a revenue gain of 7 percent to $345 million. Its operating income of $16.1 million was up 43 percent. Volume in this brokerage unit was up 14 percent, but its revenue per load was down 6.4 percent. Of its revenue of $345 million, about $174 million went through the J.B. Hunt 360 platform, compared to $151 million in the third quarter of 2018. It is a growth story; the company said its carrier base is up 29 percent from the previous year and its headcount is up 20 percent.

—In his quick reaction to the numbers, Deutsche Bank’s Amit Mehortra liked what he saw. “(T)rucking data points continue to roll in positively (after this morning’s KNX pre-announcement)...with revenue per loaded mile up 10%, underpinned by an 18% increase in rates per loaded mile. Also the company disclosed that comparable contractual customer rates increased 15% y-o-y in trucking.”