Under a new multi-year deal, Norfolk Southern will provide intermodal service to J.B. Hunt Transport Services, an initiative that will convert some of its truck traffic to intermodal.
JBHT says the move will "further establish the parties as the leading providers of transcontinental and local intermodal service in the eastern half of the United States."
"The conversion of highway freight to the more efficient, cost effective, safer and more environmentally friendly services that we jointly provide, will not only benefit shippers and the general public, but JBHT and NSC shareholders alike," said Kirk Thompson, CEO of JBHT.
In a letter to investors on the deal, Stifel Nicolaus Transportation & Logistics Research Group said the agreement is a strategic deal similar to the one the company entered into with Burlington Northern Santa Fe Railway 20 years ago. According to Stifel Nicolaus, Norfolk Southern has six major corridor development projects in the works, which could position J.B. Hunt to grow its eastern intermodal business at double-digit rates.
"The pricing arrangement contains some incentives that will give J.B. Hunt the ability to capture a larger segment of the eastern market," the investor letter said. "We believe that line haul rail unit pricing declines as the length of dray increases. This pricing mechanism should enable J.B. Hunt to be more creative with its customers in securing new business. In summary, we believe that this new deal will create a sustainable competitive advantage for J.B. Hunt in the east, from both price and service perspectives."
"Our new services with J.B. Hunt will provide shared incentives to grow volume and revenues by converting substantial volumes of freight from highway to rail," said Wick Moorman, Norfolk Southern CEO. "We look forward to working with the J.B. Hunt team to offer new, high-speed, reliable, premium services to domestic intermodal customers over our entire network, including our new Crescent Corridor route, from New England, northern New Jersey and Pennsylvania south to Memphis and New Orleans."
Stifel Nicolaus believes JBHT's balance sheet is solid and that the company is well positioned to take advantage of the upturn.