The second quarter earnings season for trucking kicked off on Monday morning with J.B. Hunt Transport Services Inc. reporting a small decline in profitability.
Net earnings fell 6.8% from the second quarter of 2016, totaling $97.9 million, or 88 cents per share, 4 cents less than a consensus forecast from analysts and compared to 92 cents per share a year earlier.
This happened despite a 7% increase in total operating revenue of $1.73 billion while total operating revenue minus fuel surcharges increased 5% from a year earlier.
The Arkansas fleet attributed the increase in revenue to load growth of 5% in its intermodal operation, a 5% increase in revenue producing trucks in dedicated operations and a 20% hike in volume with its brokerage business.
Operating income for the current quarter totaled $164 million versus $176 million for the second quarter 2016, a 7% decline.
“The benefits of volume growth and increases in revenue producing truck counts were substantially offset by lower customer rates, increases in rail and over the road purchased transportation costs, start-up costs associated with new DCS (dedicated) contracts, higher driver wages and recruiting costs, increased insurance and claims costs, increased equipment and facility maintenance costs and increased technology costs,” the company said in a statement.
J.B. Hunt’s intermodal operation reported revenue increased 7% to $1 billion from a year earlier while operating income improved 4% to $110 million. The period ended with approximately 85,600 units of trailing capacity and 5,300 power units assigned to the dray fleet, an increase of more than 4,000 units of trailing capacity with only a slight gain in power units.
The dedicated operation saw second quarter revenue increase 8% to $412 million while operating income fell 4% to $49 million as a net additional 486 revenue producing trucks, 226 net additions compared to first quarter 2017, were in the fleet by the end of the quarter compared to prior year.
Approximately 71% of these additions represent private fleet conversions versus traditional dedicated capacity fleets, according to the company while customer retention rates remain above 98%.
Operating income fell primarily from increases in driver wages, increased accident frequency driving higher insurance and claims costs and higher start-up expenses for new customer contracts compared to the second quarter 2016.
J.B. Hunt's brokerage business saw revenue increase 9% to $222 million while it posted an operating loss of $200,000. It reported a 20% increase as freight volume but lower gross profit margins. Despite this the carrier base increased 9% and the employee count jumped 21% from a year earlier.
Meantime, the company’s truck operation saw revenue decline 4% to $95 million while operating income fell 37% to $5.6 million. It was affected by a 6% drop in revenue excluding fuel surcharges while contract rates gave up 0.4% as the number of trucks in the operation declined to 2,072 from 2,186 in the second quarter of 2016.